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STATE OF THE UNION WITH CANDY CROWLEY

Interview With Sen. Durbin; Interview With Sen. Graham; Interviews With Maen Rashid Areikat, Michael Oren; Interview With Economists Alice Rivlin, Douglas Holtz-Eakin

Aired September 18, 2011 - 09:00   ET

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


CANDY CROWLEY, HOST: A week to forget at the White House: falling poll numbers, twin defeats in special House elections and tepid reaction to the president's jobs package.

Today the politics of a struggling economy with Senate majority whip Democrat Dick Durbin and Republican Senator Lindsey Graham.

Then a U.N. showdown over Palestinian statehood with the PLO's chief representative Maen Rashid Areikat and the Israeli ambassador Michael Oren.

Then recession worries with economist Alice Rivlin and Douglas Holtz-Eakin.

I'm Candy Crowley and this is State of the Union.

The president unveils how he will pay for his $447 billion jobs plan tomorrow. Public reaction to part one has been tepid. In the latest New York Times/CBS poll, Americans are split on whether the jobs plan will actually create jobs. As for the president's own employment, there is open Democratic fear he's a one-termer. The vibe was bad enough this week, the top Obama campaign strategist David Axelrod sent a memo to reporters noting that the president's support from the Democratic base is strong. The same cannot be said of independents, 54 percent disapprove of how he's doing his job.

Things can change between now and November 2012. The more immediate question is whether President Obama has the political capital to sell his jobs plan to the public and push it through congress. Joining us now, the number two Democrat in the Senate, Senator Dick Durbin. Thank you so much for being here.

And let's just start with that question. We do see a president who's being openly criticized by Democrats, whose poll numbers are falling. A weak economy. And people just not really sure this jobs plan is going to work. How do you sell that to the public and how do you pass that in the Senate?

SEN. RICHARD DURBIN (D), ILLINOIS: Candy, you can understand the skepticism of Americans. They've watched the confrontation in Washington virtually threaten to close down the government, even close down the economy. So they're skeptical of any political promises. But when you go to the specifics about President Obama's plan, you can get a positive reaction. Should we give a tax credit, an incentive to small businesses across America to hire the unemployed? Should we give a payroll tax cut to working families that are struggling paycheck to paycheck? Should we invest in making sure that we don't lose the jobs, important jobs, of firefighters and policemen and teachers. Should we put money in the economy to build America for the 21st Century. People say yes to those things.

The president's plan is a positive plan to move us forward.

CROWLEY: But let me just point out that I think some of the skepticism -- you're absolutely right -- is about this gridlock in Washington, but it is also about the fact that there was about $800 billion spent in stimulus with the White House promising, as Republicans point out all the time, that unemployment would not rise above 8 percent if we would just spend money in stimulus.

Well, it's 9.1% now. It got as high as 10.1 percent. Now you want to spend more than half that again in a $447 -- I'm sorry, more than $400 billion in jobs. So why is that going to be any more successful than the first one was in bringing down the unemployment rate which is what this is about?

DURBIN: Candy, you're going to have some economists on later and they're going to tell you this is one of the most challenging recessions America has ever faced. You go back to the Great Depression. What we did with the first effort by the president was to stop this recession from going deeper. Now we've got to do something positive.

Look at the other side of the equation and ask what the Republicans would do. They would make sure that we have no new tax burden on the wealthiest people in America and they would continue to criticize any effort to step forward and do something positive to move this economy.

Most Americans reject that. They understand that with 14 million people out of work and 46 million in poverty, we need to step up and move this economy forward. That's the president's plan.

CROWLEY: Many economists say two things. That in the short term now -- we're just talking about the short term and not the long term -- you shouldn't cut spending by too much and you shouldn't raise taxes. And yet we now know from the White House that one of the things the president wants to do is the so-called Buffett plan which is to make sure that no millionaire pays less of a percentage in federal tax than anyone in the middle class.

Is it a good idea right now to raise taxes on anybody right now?

DURBIN: Well, certainly on those who are wealthy and comfortable and wouldn't even notice it, yes. Warren Buffett has been honest, and other people I know who have been fortunate in life and wealthy have said, for goodness sakes, you can raise my taxes if that's going to help this economy move forward. I wonder if John Boehner knows what it sound like when he continues to say the position of the Republican Party in America is that you can't impose one more penny in taxes on the wealthiest people. I wonder if he understands how that sounds in Ohio to working families who are struggling paycheck to paycheck.

CROWLEY: Do you think that's the point of... DURBIN: ...how that sounds to 46 people out of work?

CROWLEY: And that's the political side of this. And do you think that is the point of this proposal, is to paint the Republicans as, again, as people who will protect the wealthy at any cost?

DURBIN: No, I'll tell you what it is. The president said at the outset that his plan to move the economy forward would be paid for. In other words, he would come up with the revenue to pay for tax cuts for working families and incentives for small businesses to hire.

So he went after two areas. He said we've got to trim the deductions which the wealthiest people in American can take, and secondly, we have to end the federal subsidy to the oil companies, which are the most profitable and richest companies in America. That to me is a reasonable way to make sure we pay for what the president says, a plan to put America back to work.

CROWLEY: When is his jobs bill getting on the Senate floor?

DURBIN: It will start the debate this week. Now there are going to be a lot of variations and ideas...

CROWLEY: But the bill won't be on the floor to vote on this week. I mean, you guys can debate anything at any point. When is the bill going to get on the floor?

DURBIN: The bill is on the calendar. Majority leader Reid moved it to the calendar. It is ready and poised.

There are a couple other items we may get into this week not on the bill and some related issues that may create jobs. But we're going to move forward on the president's bill. There will be a healthy debate. I hope the Republicans will come to...

CROWLEY: After the recess so next month? Or when will it actually begin to act on?

DURBIN: I think that's more realistic it would be next month.

CROWLEY: Next month. OK.

Let me just turn you to some politics.

As you know, the man who lost the New York district that used to be Anthony Weiner's, which has been a Democratic district for more than 80 years, says that he lost because it was a referendum on the Obama administration. What does that tell you about Democrats' chances in 2012 and the president's chances? DURBIN: I don't think anybody can predict 14 months from now what we're going to face and as David Axelrod said in this memo that you referred to, we're not talking about the president running in some black box scenario. There will be an opponent. And as I listen to the Republican presidential nominee candidates come forward and spout their ideas and bow and genuflect to the Tea Party and their agenda, I remember the Tea Party is not very popular in America. What they brought us to in Washington twice already is a confrontation that is virtually threatened to close down the government and our economy. So I don't think people like that style of politics and that's the reality of we'll be facing in November 2012.

CROWLEY: James Carville, a Democratic consultant, a true blue Democrat through and through has said that those elections should cause the White House to panic. He said it is time to fire someone. That the economy hasn't gotten any better as far as people are concerned and still the president is using the same economic team and as much as he respects them, it is time for them to go and get in some new blood to show the American people the president understands.

Good idea?

DURBIN: I've listened to this president. He's been my friend and I've worked with him nor for years. He is always open to ideas and contributions from everyone, from both sides. And he's tried to make sure that his team...

CROWLEY: Should he fire anybody?

DURBIN: Well, at this point I don't see that you would pick out one person and say that's the reason the economy's bad. That's the reason the campaign...

CROWLEY: Well, politics is about impressions, though. For people who think that he doesn't...

DURBIN: Well, of course you're right.

CROWLEY: Yeah. So should he fire some people and get in a new team and say I'm working again, we're taking a fresh look?

DURBIN: I don't think so. I'll tell you what I think. I think his team has put together a positive good plan. The American people believe that if you help working families, invest in making sure we have our firefighters an policemen and teachers on the job, invest in infrastructure, America's going to start to move forward.

What's the Republican alternative? Do nothing and protect the millionaires.

CROWLEY: Senator Dick Durbin, thank you so much for your time this morning.

Coming up next -- Americans are skeptical that either party can fix the economy. So what's the Republican strategy? We ask Senator Lindsey Graham next. (COMMERCIAL BREAK)

CROWLEY: Joining us now from Clemson, South Carolina, Republican Senator Lindsey Graham.

Senator, thank you so much for being here. I want to kind of set the stage for this discussion because we've talked about how the president's poll numbers are falling. But I wanted to show our viewers the latest CNN/ORC poll.

The question was, who do you trust more to handle the economy? And the answer was 46 percent Obama, and 37 percent Republicans in Congress, 15 percent said neither.

So having said that, let's take a look at how you feel and how you think Republicans will look at this latest thing which is the minimum millionaires tax, the so-called Buffett rule, and this, because the billionaire has said -- Warren Buffett has said, listen, I pay a lower tax rate than my secretary.

How do you politically argue against that or would you?

SEN. LINDSEY GRAHAM (R), SOUTH CAROLINA: Well, I just think that's a political move by the president. I think Senator Durbin sort of tipped his hand. How would people in Ohio accept an explanation from John Boehner to say no? Well, the truth of the matter is, if you raise taxes on billionaires and millionaires, it adds a de minimis amount of money to the Treasury to pay off the debt. I would assume that's what they're trying to do.

I think most Americans are frustrated with the tax code where 1 percent of taxpayers pay 40 percent of the taxes, the top 10 percent pay 70 percent, and 47 percent of Americans don't pay any federal income taxes.

So I'm in the camp of the Bowles-Simpson Gang of Six attempt to flatten the tax code. GE paid no corporate tax last year, so let's do away with deductions and exemptions except for interest on your home, charitable giving with a cap. Take that $1.2 trillion, buy down rates to create jobs and pay some debt off.

If you really want to address what got America into this situation, policies matter. President Obama's policies are killing job growth. What I hear at home is that you can't borrow money. And the reason banks are not lending money is they don't know what the rules of borrowing is going to be because of Dodd-Frank. No one knows what their health care cost is going to be under Obama health care. It's going up 19 percent in 2014. There's another round of costs. So when you look at his...

CROWLEY: Sure, and I know Republicans...

GRAHAM: ... policies from health care, the Bush tax cuts expire. So what will your tax be in a year? People need to know the answers to that.

CROWLEY: OK. I know that you all think that regulations is what is making businesses sit on their money. And that's your argument...

GRAHAM: Yes. That's the one I forgot. Thanks.

CROWLEY: OK. Then -- but let me get back to the idea of just the fairness of millionaires paying a lower rate than those in the middle class who do pay taxes. Is that something you can argue against? And why not -- OK, let's say it doesn't add that much to the Treasury. Nonetheless, there is some fairness here.

(CROSSTALK)

GRAHAM: No. The goal is to do what with the tax code? Collect taxes to run the government in a way future generations can afford. Tax policy is job policy. The tax code should be reformed for one purpose, to generate more revenue to help run the government and to create jobs.

And when you pick one area of the economy and you say, we're going to tax those people because most people are not those people, that's class warfare. Look at what Bowles-Simpson did. They didn't pick on Warren Buffett or any other group. They're going to make all millionaires and billionaires pay a higher rate by eliminating the deductions.

They're going to make corporations pay our higher rate, 25 percent will be the top rate, but they're going to have to pay it because they don't have the deductions and the loopholes of getting out of paying. That's the model.

What Bowles-Simpson did, what the Gang of Six, let's take a tax code that is so complicated that GE pays no taxes, flatten the rates to be economically competitive, but get people actually to pay taxes.

CROWLEY: OK. In terms of the president's jobs plan, because the tax reform at this point, a lot of people don't think it can actually be done by the end of December. But let's move aside -- move ahead from tax reform, and let me ask you, what is there in the president's jobs plan that you could support? What major item in that can you support?

GRAHAM: There is some. The payroll tax might be one, some infrastructure spending. His $447 billion proposal is a lot like what Republicans proposed the first time around. But here's where we're at as a nation. We have 11 percent unemployment in South Carolina. And here's what I hear when it comes to hiring people. People are frozen right now. They're not going to hire. You may build a bridge in South Carolina or deepen the Port of Charleston, that would help our economy in the short term.

But if you want to have a wave of hiring in this country, you've got to provide certainty. People don't know what their tax bill will be because in 2013 the Bush tax cuts expire. The Obama health care costs are a nightmare for job growth because it adds a tremendous amount per employee to future hires.

Banking, you can't grow an economy if you can't borrow money. Capital is locked down in my state. So you could have all the stimulus you want, until you change Obama's policies that have frozen job hiring, that's made everything worse, we're going to stay right where we are, bumping along the bottom.

The president either needs to change his policies -- you don't need to fire somebody, you need to -- fire somebody is good only if they do something different. But the president's policies are stifling job growth and there will be no job growth until they change.

CROWLEY: Let me turn you then to the presidential election. You have said that Texas Governor Rick Perry has to prove that he's electable. What about him -- or what about his policies makes you and people question...

GRAHAM: All of them do.

CROWLEY: ... whether he's electable?

GRAHAM: Well, what I would say, number one, this is our election to lose. President Obama has done everything he knows how to do to beat himself. The reason people have little confidence in President Obama's policies, they're just not working. Everything is worse, 2 million people unemployed after he took office. Gas prices are 100 percent higher. Home values are down. Debt is up by 35 percent.

CROWLEY: But are there any Republicans...

GRAHAM: There seems to be no relief on the horizon. He keeps proposing the same old things.

CROWLEY: I'm sorry, what I'm...

GRAHAM: Yes, there are some problems for us...

CROWLEY: ... trying to get is...

GRAHAM: ... here's what we have to do...

CROWLEY: ... are there any Republicans that are unacceptable alternatives that are currently in the field?

GRAHAM: Well, you know, we'll leave that up to the -- well, here's what I think a Republican has to do to beat President Obama. On day one, after the election, here's what's going to be different in your business life, in your personal life.

You're going to have certainty in your taxes. We're going to flatten the tax code. We're going to make people pay taxes. We're going to have lower rates.

GRAHAM: We're going to replace Obama health care with something that's more business friendly. We're going to get people into lending business by having a banking system that the banks can actually understand.

But when it comes to entitlement reform, that's where the money is at. I hope the super committee will take up entitlement reform. And Governor Perry has a good record on job creation. He needs to tell the country what he did in Texas.

But when you talk about Social Security and Medicare, they have to be on the table. And they have to be on the table in a way to save these programs for future generations and that's what I want the Republican Party to do, look the camera in the eye and say that Social Security is a vital program, 50 percent of Americans will be in poverty without Social Security. It is going broke. We're going to have to adjust it for younger workers, protect it for people near retirement and come up with a plan that will create jobs.

CROWLEY: Thank you so much, Senator Lindsey Graham out of South Carolina for us today, we appreciate it.

Up next, Palestine wants full membership from the United Nations and Israel accused them of avoiding negotiations. We get both sides to this very contentious debate.

(COMMERCIAL BREAK)

CROWLEY: When the president spoke to the U.N. General Assembly last year, he had big dreams.

(BEGIN VIDEO CLIP)

OBAMA: When we come back here next year, we could have an agreement that will lead to a new member of the United Nations, an independent, sovereign state of Palestine living in peace with Israel.

(END VIDEO CLIP)

CROWLEY: One year later there is no Israeli-Palestinian agreement. But when the U.N. General Assembly opens this week, Palestinian Authority President Mahmoud Abbas says he will seek full membership, recognition of a Palestinian state.

That would not make Palestine a state with defined borders, but it would give its officials more international recognition and the U.S. fears more power to go after Israel for what Palestinians consider crimes committed in the Gaza Strip.

The White House has vowed to veto the bid in the security council insisting an independent Palestinian state be created through direct negotiations with Israel.

Up next, the Palestinian representative to the U.S. and then the Israeli ambassador to the U.S.

(COMMERCIAL BREAK)

CROWLEY: Joining me now, Maen Rashid Areikat who is the Palestinian Liberation Organization's chief representative to the U.S. Thank you for joining us.

What is the current plan for the U.N.? Will President Abbas go to the security council? Is that set?

MAEN RASHID AREIKAT, PLO'S CHIEF REPRESENTATIVE TO U.S.: Well, the president did announce on Friday that the Palestinians will submit the request to the U.N. secretary-general on Friday, September 23rd, for full membership at the United Nations.

So the plan that after his address at the United Nations General Assembly he would officially request that the U.N. consider the Palestinian request.

CROWLEY: And will the petition designate pre-'67 borders, as well as east Jerusalem as the capital?

AREIKAT: Well, I'm not still familiar with the exact language of the draft resolution but I strongly believe that it will reiterate long-standing Palestinian position. It will talk about the Palestinian state in the West Bank, the Gaza Strip with East Jerusalem as its capital. It will call for two-state solution, two states, Israel and Palestine, living side by side in peace and security. And I believe it will also emphasize the need for negotiations to resolve the outstanding issues.

CROWLEY: Now you know that diplomatically this is very hard for the United States which, if it comes before the security council, as far as we know, is going to veto this idea. They have said this will undermine negotiations. Israel says it will set back the Palestinian cause.

Is there anything right now that could be presented to you -- because lots of meetings are going on -- that would dissuade you from doing this at this time?

AREIKAT: Well, the leadership -- the Palestinian leadership said in the past that if we were presented with a viable alternative...

CROWLEY: And what is that?

AREIKAT: A viable alternative would be clear terms of reference to return to the negotiations, clear time frame and an end game. To the Palestinian, the end game is freedom, to be able to live free and for the Israeli military occupation to end.

We also insisted that we cannot continue to negotiate while the Israelis are planting our territory, the same land that will become our state in the future with illegal settlements. So, you know, that viable alternative unfortunately has not been offered to us to encourage us to sit and get engaged in Israelis in meaningful negotiations.

CROWLEY: The United States, certainly there is feeling among some in the United States, that believe that the Obama administration has taken Israel to task for its continued settlements in East Jerusalem and the West Bank, that he has been very tough on Benjamin Netanyahu in Israel, and that this particular action by the Palestinians totally undercuts President Obama in the Middle East, with Israel, with Arab countries, that it just diminishes U.S. power at a time that the U.S. is really pushing Israel to come to the table and to stop the settlements.

AREIKAT: We have no interest whatsoever to undermine President Obama.

CROWLEY: But it will, won't it? Do you agree that it will?

AREIKAT: Well, you know, we -- the decision to oppose the Palestinian effort is not a Palestinian decision, it is an American decision. The United States decided that that he will veto any request at the U.N. Security Council.

We wish that the United States would reconsider. We wish that the United States will actually cast a vote in favor of Palestinians seeking freedom, because this is the natural position of the United States. This is what we have seen in the region by the United States -- support for all the peoples in the region who are seeking freedom and independence.

CROWLEY: But the U.S. position is that the territory and the statehood can only be done through negotiations with Israel and therefore -- and believes that this will undermine that effort.

So you can see that when -- that if you force the U.S. to veto this, that people on the streets in the Middle East will be very angry at the U.S. at a time where it is a very delicate time throughout the Middle East.

AREIKAT: But we don't disagree with the administration that there has to be negotiations. The problem is that there are no negotiations right now. We have been engaging with the United States for over a year now. The U.S. administration knows that very well. Senator Mitchell, who was a special envoy, knows that very well.

We have been forthcoming, receptive, worked with every idea, suggestion, proposal that the U.S. submitted to us. We urge the Israelis to sit down and talk about security and borders. The same thing the United States did with Israel.

Unfortunately, the Israelis did not want to sit and engage. And today they say the Palestinians don't want to return to negotiations. We are the party who needs negotiations the most, who need an end to the conflict the most.

CROWLEY: I'm sure that later -- obviously we will get the Israeli point of view. They feel that Israel's right to exist is not recognized throughout the Palestinian community.

But let me ask you if what your feeling is about the ability to get around this crisis. Do you think there really is a chance that the U.S. or Israel or the E.U., somebody, could come up with something? Is there a chance of that or not?

AREIKAT: Well, I mean, the official decision was announced by President Abbas on Friday. He is en route to New York. He will arrive later on tonight. I'm sure there will be continued discussions. But, again, unless, unless there is that viable alternative to the Palestinian people, to tell them that this time around it is not going to be a waste of time. We don't want negotiations for the sake of going back to negotiations, getting engaged in a process that will not produce peace.

Five days ago was the anniversary of the Oslo Accords, the 18th anniversary of Oslo Accords, an agreement that was supposedly aimed at providing Palestinians with freedom and independence in 1999.

At that time, 200,000 settlers were living in the occupied Palestinian territories. Today we have 550,000 settlers living in the occupied Palestinian territories. Things are getting worse for the Palestinians.

We want to keep that hope alive. We want to keep the hope alive among the Palestinians that the two-state solution is still feasible. This is why we are taking this step at the United Nations.

CROWLEY: It is a symbolic step for Palestinians.

AREIKAT: We understand that it is not going to change things on the ground. Israel has the upper hand. They are the stronger party in this equation. The aim of this is try to elevate the Palestinians to a more equal footing so that this disparity that existed over the last 18 years, which allowed Israel to exploit it to its advantage, can end and they can talk now to an equal member state of the United Nations.

Their land is occupied. They are the occupier. Let's sit down and solve the problem.

CROWLEY: Maen Rashid Areikat, thank you so much for stopping by. Busy week ahead, I know.

AREIKAT: I really appreciate it, thank you.

CROWLEY: And after the break, the response from the Israeli ambassador to the U.S.

(COMMERCIAL BREAK)

CROWLEY: We are joined now by Michael Oren, Israeli ambassador to the United States.

You have said, I found an interesting quote, quote: "The Palestinians risk all that has been achieved if they go forward with this," "this" being the bid for statehood recognized by the U.N. It sounds like a threat. What does that mean exactly?

MICHAEL OREN, ISRAELI AMBASSADOR TO U.S.: First of all, good morning, Candy.

CROWLEY: Good morning!

OREN: Good to be here. It's good to be here. Israel wants peace. Israel wants peace. Prime Minister Netanyahu has said he's willing to negotiate with President Abbas anywhere, any time, without preconditions on the basis of territory for peace.

That's what we've been negotiating about for years, territory for peace. And we know what it means, territory for peace. And we know we have to make compromises. We have to work out all of these difficult relationships and problems with the Palestinians. The Palestinians want all the territory without the peace. They're end- running this peace process. Now over the course of the last 18 years, since this peace process has gone, the Palestinians have achieved a lot.

They have a very successful economy. They have security in the streets. We are prepared to go about a two-state solution, a Jewish state living side by side with a Palestinian state. All that could be jeopardized if the Palestinians end-run the peace process and take the territory without the peace.

CROWLEY: But you heard the PLO representative say, we are willing to go to negotiations the day after this happens. They understand it's symbolic. They understand it doesn't change anything on the ground. But they feel that there has been very little hope that Israel will come to the table because it keeps -- as you know, the U.S. is opposed to the continuing development in the West Bank and East Jerusalem by the Israelis.

So why does it jeopardize anything if nothing changes on the ground, it's just a bid by the Palestinians to be seen as a state that you think that eventually they should be?

OREN: Oh, the PLO representative says one thing, but President Abbas says a different thing. In a New York Times op-ed in May, he said that he's going to the U.N. to get this state not to make peace but to challenge Israel's legitimacy in international arenas and to try to undermine the peace process.

He has also made a pact with Hamas. Let's not forget this. Hamas is a terrorist organization. It has fired thousands of missiles at Israel. It calls for not just the destruction of Israeli, it calls for the annihilation of the Jewish people worldwide. It is a genocidal organization.

What kind of state is this going to be? Is this going to be a state that's going to preserve peace? Is this going to be a state that's going to live in mutual respect and recognition with Israel? Is this a state that's going to operate on the orders of Iran and bring more instability and terror to the region?

I think these are very important questions.

CROWLEY: But even just the bringing up of this, let's say -- we know that the U.S. has said they're going to veto it if it comes to the Security Council, if that's the route they go, which it seems as though they will. If it goes to the General Assembly for just sort of an increased status for Palestinians, it is quite likely to pass. How does that -- why is that such a threat to Israel?

OREN: Well, as Mahmoud Abbas said in that article in the "New York Times" and other Palestinians -- leaders have reiterated since then, that they tend to use that enhanced status to go to international courts and delegitimize us. They can try to impede our ability to defend ourselves from our coasts, from the air.

They can try to put sanctions on us. It is not about making peace. It is about putting out -- building their conflict against us into a different level, a different field.

CROWLEY: From your point of view, has the U.S. done enough to try to prevent this petition from being presented to the U.N.?

OREN: Indeed, they have. They've been working tirelessly to try to prevent this happening. American diplomatic representatives have been working with other members of the Quartet, the European Union, the Russians, the U.N., to create a format which would be acceptable to us -- and we are very, very close now to the American position -- and to persuade the Palestinians to desist from going to the U.N., to come back to the negotiating table.

Again, we are willing to negotiate today, without preconditions, on all the outstanding issues.

CROWLEY: Now do you accept the premise at this point that U.S. influence in the Middle East is a lot less than it has been in the past?

OREN: I think the situation in the Middle East is very fluid. No one knows what's going to happen in the Middle East tomorrow, never mind in two weeks.

CROWLEY: Isn't that a reason for you to just stop the settlements and come to the table?

OREN: Well, we've stopped the settlements. We've stopped the settlements for ten months and the Palestinians didn't come to the table. We're willing to extend that for another three months. And the Obama administration determined that they still weren't going to come to the table, the Palestinians.

But I need to go back to your first question. Candy, is American influence waning? It's a very important question. You look across the Middle East today, and you know there are many people protesting for democracy and for opportunities and jobs and a future for their children. The model they're looking for is not somewhere in the east. The model they're looking toward is still the United States. And when governments and leaderships in the Middle East look for peace makers, they turn to the United States. There's no alternative to American influence in the Middle East.

CROWLEY: I want to show our viewers a poll that was done by Pew Research. this Is among Israelis. And the question was do you approve or disapprove of President Obama's handling of the Israeli-Palestinian conflict, not necessarily what's going on at the U.N. Only 29 percent of Israelis approved of how the president's handling this; 64 percent of Israelis disapprove of how the president is handling Israeli- Palestinian conflict.

Which side are you on? And why do 64 percent of Israelis disapprove of the president of the United States? Has he not been a huge ally? Lots of money, lots of sharing of intelligence. He's tried -- right now, he's standing between you and the U.N. Why is it that Israelis don't see him as helping?

OREN: We've have some tactical differences about how to get to the two-state solution, but they've been tactical differences. Those make a lot of press in Israel and they make a lot of press here. But the fact of the matter is we're very much on the same page about where we need to get to. We need to get to a two-state solution bases on a Palestinian state living side by side with a Jewish state, in permanent and mutual peace and recognition.

There are excellent security relations between the Israeli government and the Obama administration. Truly fine security arrangements.

CROWLEY: You'd be among those who approve.

OREN: Just a couple weeks ago, we had that problem with our embassy in Egypt. Prime Minister Netanyahu called the president. The president immediately got on the phone to Egyptian leaders and helped evacuate our embassy personnel. And Prime Minister Netanyahu came out and thanked President Obama warmly about that.

We have a very deep relationship with the United States of America. It is based on common values, common interests. We face some common enemies. It is a permanent and unbreakable relationship.

CROWLEY: Israeli ambassador to the U.S., Michael Oren, thanks for joining us today.

When we come back, a crucial meeting for Ben Bernanke and the Federal Reserve next week. We'll tell you what it could mean for the economy.

(COMMERCIAL BREAK)

CROWLEY: Here to talk about fears of a double-dip recession and a number of other things, former Congressional Budget Office Directors Alice Rivlin and Douglas Holtz-Eakin. Thank you both. OK, this Fed meeting, all of a sudden I started hearing economists say, oh the Fed's meeting next week. It's not just a one day. It's a two-day meeting. And it's very important.

ALICE RIVLIN, ECONOMIST: Well, the fed Has a big problem right now as to whether there's anything else they can do to help the economy along.

CROWLEY: Sort of they said there wasn't.

RIVLIN: Bernanke himself has said we did a lot. We lowered interest rates. We bought a lot of government bonds. The one thing they're talking about now is can they rebalance their portfolio, as it were, to roll off the short term bonds as they come due, and invest in long-term bonds.

That's called "the twist." And all it would mean is they use the powers that they have, because they have a very big portfolio, to put a little downward pressure on long-term interest rates.

DOUGLAS HOLTZ-EAKIN, ECONOMIST: I think what Alice is saying is this going to be a boring two-day meeting.

CROWLEY: First of all, aren't long-term interest rates already really down? So it sounds like they're just --

HOLTZ-EAKIN: So this is more evidence that there's really not much the Fed can do to push the economy along faster. It is still well positioned if something bad happens. You worry about Europe. It can step in if things start to spill over to the U.S., something goes wrong here. They're well positioned for that.

CROWLEY: But in terms of creating jobs, we're kind of looking elsewhere. Let me move you then to the president's jobs plan. I was interested, because your initial reaction that I saw basically was it might create some jobs but they're really expensive jobs. And your reaction was there's not enough money here to make a difference. Do I -- have I summed this up correctly?

RIVLIN: Well, I think they should do many of the things that are in the president's program, because it would help and because the economy does seem to be stalling, and the government needs to do what it can in the short run to create more jobs and create more demand. That's what the president is trying to do. I would do it big.

CROWLEY: Bigger than he's done it?

RIVLIN: Well, he won't get all that he --

CROWLEY: No, he won't. But if you had your -- if you could rule the world?

RIVLIN: I would do it at least as big as he is proposing, but I would fold it into the other big problem, which is the long-run deficit. He has got this Joint Select Committee, the "12 apostles," as they are being called now, who have extraordinary powers.

And they can put together a plan that not only supports the economy in the short run, but much more importantly is a grand bargain to reform entitlements and reform the tax code and put us on a sustainable deficit track.

CROWLEY: Let me ask you this question in sort of a different way. And that is, we have spent about over $80 billion in the first wave of stimulus. And, you know, it saved jobs, it did whatever, but we are still looking at a 9.1 percent unemployment rate. The administration's predictions, we're nowhere near the 8 percent.

Why would another $447 billion be any different?

HOLTZ-EAKIN: I don't think it is the dollars, I think it's the strategy. And I do think the administration would be well-served to both do some of the things Alice just talked about. We really need an entitlement reform, we are sailing straight toward a debt crisis. We really do need a better tax code.

Those are permanent changes to the environment. That's what I think they should focus. There was a time and a place for one-time targeted temporary stimulus. It's not now. We have been growing for two years, we are growing far too slowly. And we need permanent reforms that will speed the overall pace of economic growth in the United States.

He would be well-served to focus on that. And on this committee, it will not be successful without presidential leadership. In the end, this is a Congress that has one part Republican, one part Democrat, to be successful we have got to have bipartisan solutions. That always requires the White House taking the lead. That's the main challenge right now.

CROWLEY: Let me ask about just a couple of specifics. One of the things that the president is proposing is a tax break for businesses who hire either vets or people who -- new hires. But corporate profits are up. All I hear is how much money they are all sitting on because they are so scared about what is going to happen next.

Why would more profit and more money cause them to hire more people?

RIVLIN: Well, at the margin, I think it would. He's talking about small businesses. Really big businesses with payrolls beyond the cut-off of this bill aren't going to be affected. And probably big business hiring isn't much affected by it.

But for small business, the payroll tax is a big deal. And at the margin, it could help hiring more people, more veterans, more anybody. And that's a good thing. But it does -- it's one more complication in the tax code and I'm with Doug, I think the main thing the president needs to be emphasizing is the long run and the opportunity to simplify the whole tax code.

(CROSSTALK)

HOLTZ-EAKIN: It's emblematic of the problem with the strategy. It's temporary, so it's not going to change permanent hiring decisions very much. It's not really aimed at everybody. It's targeted on particular groups. And I think that has not worked.

I mean, you don't want the government picking particular groups to get special labor treatment. You don't want to have these temporary policies. We need better growth for everyone on a long-term basis. CROWLEY: Well, one thing we know of, that is a lot of this temporary tax stuff tends to be permanent. It's hard to get it out of the system.

HOLTZ-EAKIN: It's a mess.

CROWLEY: But it totally is for anybody that has to files their taxes, for sure. Let me ask you about this so-called "Buffett rule," the idea that the president tomorrow will propose that no millionaire pays a lower percentage of taxes than someone in the middle class.

Is this another one of those margin things, around the margins it may help? I mean, this is being introduced as, here is how I'm going to pay for my plan.

HOLTZ-EAKIN: Well, we should let Alice go first and be reasonable, because I'm really unhappy with this.

CROWLEY: Oh, OK. Well, be reasonable in a short way so I can get him in.

RIVLIN: I'm very fond of Warren Buffett. I think his basic observation that he pays too little taxes is right. But the way to fix the tax code is to fix the tax code, not to add another complication at the margin.

CROWLEY: Now, see, you're nodding.

HOLTZ-EAKIN: Right? And this -- so is politics. We already have something, the alternative minimum tax, which is supposed to make sure that millionaires pay their fair share. It's broken. Layering a Buffett tax on top of it won't fix that.

We do need the tax reform Alice talked about. And, you know, when the president gets in trouble, beginning in 2007, he starts talking about taxing high income people. And we have seen this political movie before. I don't think it's anything more than that.

CROWLEY: Douglas Holtz-Eakin, Alice Rivlin, thank you both for joining us.

HOLTZ-EAKIN: Thank you.

RIVLIN: Thank you.

CROWLEY: Up next, our top stories, and then on "FAREED ZAKARIA: GPS," a conversation with President Obama's jobs czar, GE's CEO, Jeffrey Immelt.

(COMMERCIAL BREAK)

CROWLEY: Time for a check of today's top stories. The U.S. Geological Survey says a 6.8 magnitude earthquake struck Sikkim, India, today, in the remote mountainous northern region of the country. No major damage has been reported. And another setback in the effort to get two American hikers released from prison in Iran. Josh Fattal and Shane Bauer's lawyer says he was not able to get a signature for their bail paperwork because the judge is on vacation until Tuesday. Fattal and the other have been held as spies for more than two years.

Fierce fighting is ongoing in parts of Libya between forces loyal to Moammar Gadhafi and revolutionaries. Anti-Gadhafi forces are hoping to soon take control of Sirte, Sabah, and Bani Walid. Meanwhile, a spokesman for Libya's transitional government says there is still no definitive information about Gadhafi's location.

In West Virginia, a pilot was killed when he crashed his plane during an air show Saturday afternoon in Martinsburg. Investigators are still looking into the cause of the crash. No one on the ground was injured.

Meanwhile, the death toll from Friday's plane crash at a Nevada air show stands at nine with nearly 70 injured. There have been at least 13 deaths at U.S. air shows this year.

And those are today's top stories. Thank you so much for watching STATE OF THE UNION. I'm Candy Crowley in Washington. And be sure to tune in next week for my interview with Republican Indiana Governor Mitch Daniels, that is next Sunday, 9:00 a.m. Eastern.

Up next for our viewers here in the United States, "FAREED ZAKARIA: GPS."