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CNN Late Edition with Wolf Blitzer

Interview With Mitt Romney; Interview With Jennifer Granholm

Aired November 23, 2008 - 11:00   ET


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

REP. NANCY PELOSI, D-CALIF.: What are they going to do with the money and how do we tell the American taxpayer that it was worthwhile to put this in?

BLITZER (voice-over): The big three U.S. automakers ask the federal government for a bailout, but Congress says not so fast. We'll discuss what to do about a key industry on the verge of collapse with former Republican presidential candidate Mitt Romney, Michigan Governor Jennifer Granholm, Republican Senator Kay Bailey Hutchison and Democratic Senator Carl Levin.

From rising unemployment to a jittery Wall Street, how should the next president tackle an economy in crisis? Insight from "Forbes" company president and CEO Steve Forbes and former Clinton labor secretary Robert Reich.


BLITZER: Hillary Clinton is on track to be the next secretary of state as Barack Obama's cabinet appears to be taking shape. We'll assess the transition to power with James Carville, Ed Rollins and the best political team on television. The first hour of LATE EDITION begins right now.


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

Executives from the top three automakers here in the United States face very tough questions on Capitol Hill this week as they ask congress for a multi-billion dollar bailout. But the government's wallet won't be opening up until those companies submit a plan for long-term financial stability. Some critics say it's time for the automakers to sink or swim on their own. Among them, our guest, the former Republican presidential candidate and former Massachusetts Governor Mitt Romney. Governor, thanks very much for coming in.

ROMNEY: Thanks, Wolf. BLITZER: You wrote a pretty provocative piece on the op/ed page of the "New York Times" this week, basically saying these three big auto companies, they've got to restructure themselves. They can't simply wait for a government handout. Under what circumstances would you support a $25 billion bailout?

ROMNEY: Well, I'm not sure the right number is $25 billion. But whatever it is, it can only be a check written if the auto industry has restructured itself so that it can be competitive long term. What you can't do is just send a big check to the same guys to do the same thing.

Look, GM has lost point after point of market share. 2002 they had roughly 30 percent of the market, they're down to about 22 percent of the market now. They keep losing market share. They keep losing jobs. Putting money into that kind of a structure is not the right answer. I think Washington got it right this week. They said, you know what? You have to build a plan that shows you can succeed long term. That kind of plan is the kind of plan that we can invest in.

BLITZER: Do you think they can do that? GM, you point out that they had only 20 percent of the market share right now. Back in the '60s, it was around 50 percent of market share. What can they do, specifically, to reassure you, the Congress, the taxpayers that they're worthy of these kinds of funds?

ROMNEY: Well first of all, I think it begins with management and you're going to have to see some new faces in management. You're also going to have to see a restructuring of management, downsizing some of the corporate overhead. You're going to have to look at the distribution network and help the company rid itself of the most unprofitable parts of this distribution network.

And, of course, the labor element is a big part of the burden that this industry faces. The U.S. automobile companies are subject to about a $2,000 per cost disadvantage relative to foreign companies that come here and build cars. You can't compete if the cars you make have $2,000 less value in them at the same price point. That is going to have to change. That's pension benefits. It's health care costs for pensioners and current employees. It's going to make Detroit competitive with the companies that come here from afar.

And if we do that, there's no reason Detroit can't compete because Detroit has shown it can make competitive cars. They're dramatically seeing improvements in their cars. This is an industry that can survive and can compete, but only if we take this opportunity to restructure it and make it competitive.

BLITZER: Can they do all that restructuring without filing formal Chapter 11 bankruptcy protection as it's known.

ROMNEY: Well Chapter 11 of course is not a liquidation. That's not the right course for the American automobile industry. But Chapter 11 allows people to get rid of some excess burdens that keep the companies from being successful. We've seen it before in other industries but there are other ways to go. There could be an out of court settlement among the main parties to restructure their costs. There could also be a federal entity of some kind or individual that plays, if you will, almost the role of a receiver that comes in and gets these companies in shape under the collaborative work of management and union.

But one of those courses is going to have to be taken because government just should not write a big check to the same guys to do the same thing. All that would mean is continuing share loss and lack of competitive ability to keep up with the foreign makers.

BLITZER: Richard Wagoner, the GM CEO says if they were to do any of those things, go into Chapter 11 or file for bankruptcy, it would even make matters worse because people would be reluctant to buy a GM car knowing that they could have problems getting spare parts or warranty guarantees along those lines. Is he right?

ROMNEY: Well actually, him going to Washington and saying that the companies are going to disappear unless they get $25 billion is already a signal to consumers.

Going into Chapter 11, I'm not convinced would have that big of an impact, particularly if Washington were to say quite clearly we're not going to let these companies go away. We're going to guarantee the warranties for anybody who buys a U.S. made automobile this time going forward for some period of time.

We're going to help with the post-bankruptcy financing that allows these companies to thrive and grow. We basically need to restructure them and then help them get back on their feet and make sure that their future is bright. But just putting money into them as is, is not going to help anybody and frankly is going to lead to these companies losing market share long term and perhaps facing liquidation way down the road. That's the wrong way. That we don't want to see.

BLITZER: If these companies don't restructure very, very quickly, are you willing to let the U.S. auto industry, in effect, die?

ROMNEY: Well, I don't want to see it die, that's the wrong course and the union and management and the state officials are not going to let that happen. There's no reason for that to happen. The U.S. automobile industry is making very good cars these days. They've been, actually, really remarkable in designing cars like the Chevy Malibu, the Ford Mustang. There are some -- you know, the Chrysler 500.

These are really innovative designs, they're ranked very well. The companies don't have to go away. But what has to go away is the excess burden we've laid on them and that's the burden that's the cause of managers that show up in corporate aircraft and eat in executive dining rooms. That spreads the resentment throughout the company that makes it difficult for labor to do what needs to be done on that front. These are companies that are not going to go away. We shouldn't have them go away. But we should help them get on their feet so they can compete and finally beat back Toyota and Nissan and Honda and BMW, all of whom make cars right here in the U.S. BLITZER: You're a son of Michigan, your father George Romney was a former governor of Michigan, auto executive himself. So, you're really a product of the whole auto industry. When you were running for president back in January, you said this to the Detroit Economic Club. I'm going to play the little clip. Listen to this.


ROMNEY: If I am president, I will not rest until Michigan has come back. I am convinced that Michigan can, once again, lead the world's automotive industry.


BLITZER: Is there any contradiction what you said then and what you're saying now?

ROMNEY: Oh, it's precisely the same thing. There's no question. And I said at the same time there that the $2,000 per car cost disadvantage was back breaking and I said I do not support a bailout. That was in that January speech this year. I do not support a bailout. I support a workout.

I want to see this industry shed the unnecessary retiree burdens, the unnecessary and excessive UAW costs. There is something called the job bank where if GM or Ford closes a factory, they have to keep paying the workers, even though they don't work there any more.

These kinds of burdens keep the American manufacturers from being competitive with the companies overseas. We have got to end that so we can rebuild this industry and have the kind of future that frankly Detroit, Michigan and the auto industry deserve.

BLITZER: Here's what Richard Wagoner also told the Senate Banking Committee, governor, back on Tuesday because he says there aren't structural problems there. The auto industry in the United States is facing a bigger problem. Listen to this.


RICHARD WAGONER, CEO, GM: I do not agree with those who say we are not doing enough to position GM for success. What exposes us to failure now is not our product lineup, is not our business plan, is not our employees and their willingness to work hard, is not our long- term strategy. What exposes us to failure now the global financial crisis, which has severely restricted credit availability and reduced industry sales to the lowest per capita levels since World War II.


BLITZER: Does he have a fair point? ROMNEY: There's no question that is a major part of what Detroit faces today is the global economic crisis. At the same time, there's no question, but the GM and the other automobile companies have been losing market share and shedding jobs for decades. And, so, this is the time to take advantage of an opportunity to restructure these companies to make sure that from management all the way through the assembly line, they're competitive with the Japanese and the foreign makers in this country so they can gain market share once again and become competitive here.

ROMNEY: You know, we do real well in Germany, in China, and in Great Britain. American manufacturers do well there, where they don't have these excessive burdens.

But here in the U.S., we're getting our clock cleaned by foreign manufacturers who come here without the cost burdens we have here. That's what's got to happen. That change has got to happen. And this is the time to do it.

So, you know, half of that statement is right. They need help right now, because of the downturn of the economy, but they also should see this as an opportunity to finally get themselves structured to be cost-competitive with the foreign brands.

BLITZER: What do you think of the new Obama economic team that seems to be emerging right now?

Timothy Geithner is going to be the secretary of the Treasury. He's the president of the Federal Reserve in New York, right now.

Larry Summers, looks like he's going to have the National Economic Council in the Obama White House.

Bill Richardson will be the commerce secretary, and more.

How does this shape up, from your perspective?

ROMNEY: Well, Timothy Geithner and Larry Summers I know quite well, and, frankly, I'm encouraged by their participation on the new economic team. I don't know Governor Richardson's experience in this venue as well.

But I think a good team is being assembled. I think it's a time to give the president an opportunity -- the president-elect an opportunity to put together his program.

You know, we're going to be facing a trillion-dollar deficit in his first year. And I know he's going to want to stimulate the economy at the same time. But, you know, we're going to have to cut back on some of the excesses of government, or the massive borrowing could cause some secondary effects that would hurt us, long-term.

So, you know, I'm going to let them have some time to put together their own plan, and hopefully we'll see a good plan come forward. BLITZER: One final question, Governor, before I let you go. Mike Huckabee was your rival, the former Arkansas governor, for president of the United States.

In his new book, "Do the Right Thing," he writes this -- he really slams you. He says, "His attitude of disrespect trickled down through his ranks, too, and was one of the reasons that, while there was generally good camaraderie among the candidates, there was an almost universal discomfort with Romney and his team."

I'm going to give you a chance to respond to Huckabee's criticisms.


ROMNEY: Well, you know, with the challenges we have, an automobile industry on the ropes, with the economy in real trouble, with global terror continuing to be a threat, I don't think a lot of people have a great deal of interest in a couple losing campaigns from a year or two ago.

So I'm going to reserve my time and my thoughts for strengthening our party, and for standing behind the right policies and principles that will make America the leader of nations that it's always been.

BLITZER: You're thinking about 2012?

ROMNEY: No, I'm thinking about 2010, hoping that we Republicans will be able to have a strong message that gets more individuals elected and brings balance to Washington.

Democracy requires two strong parties, not just one. I was, on Friday, down in Georgia, campaigning in that election. I'm going to do my very best to help the Republicans across the nation reestablish a balance of power in Washington.

BLITZER: Governor Romney, thanks for coming in.

ROMNEY: Thanks, Wolf. Good to be with you.

BLITZER: Thank you. And just ahead, a very different perspective, the Michigan governor, Jennifer Granholm. She's standing by live. We'll get her take on a possible Big Three bailout.

Also, James Carville and Ed Rollins -- they're standing by, live, to weight in on the emerging Obama cabinet. You're watching "Late Edition," the last word in Sunday talk.


BLITZER: Welcome back. Coming up, by the way, in our next hour, will Congress pass a huge new economic stimulus plan, as President- elect Barack Obama is proposing? We'll hear from two leading members of the U.S. Senate. That's coming up in our next hour.

But joining us, right now, from East Lancing, Michigan, is that state's governor, Jennifer Granholm.

Governor Granholm, thanks very much for coming in.

GRANHOLM: Good morning, Wolf.

BLITZER: What did you think of Governor Romney's proposals that GM, Chrysler and Ford -- they simply need to get their act together, do a major restructuring before they become worthy of any federal government assistance?

GRANHOLM: I don't think anybody wants to see a blank check. I don't think anyone wants to be in this position in 6 to 12 months. But what Governor Romney wrote in the New York Times last weekend was, quote, "Let them go bankrupt."

And I don't think that's exactly what he was saying a minute ago. I think he's, sort of, backed off of that. But nobody is going to buy a car from a bankrupt automaker.

They've done independent surveys, Wolf, and 80 percent of consumers say they would not buy a car from a bankrupt automaker.

You can't manage yourself out of bankruptcy if no one is buying your products to be able to have the funds to move through bankruptcy.

So, the bottom line is, is that clearly, the automakers have to demonstrate to Congress that they are restructuring and they have a plan to move them forward, to show leadership in fuel efficiency, show leadership in electric vehicles.

That's what they've got to come to Congress with. They did not make an effective case this past week in the plans that they are undertaking to lead the nation to energy independence. And that's what's frustrating.

You know, and I'm sorry to keep going on, but...


BLITZER: Well, let me stop you for a moment...


BLITZER: Because there's a difference between filing bankruptcy and filing for Chapter 11 bankruptcy protection, as it is. And the argument is, if they file for Chapter 11, this gives them an opening; it gives them an opportunity to do the massive restructuring that everyone seems to think they need to do.

GRANHOLM: No, they -- I mean, it's the same thing to the consumer, though, Wolf. You know, filing for Chapter 11 means that you have essentially filed for bankruptcy.

So consumers are not going to buy a car from a company that they are concerned their largest consumer purchase is not going to be able to have their warranty serviced; it's not going to be able to get the parts, as you said.

BLITZER: Because Governor Romney just said...


BLITZER: Excuse me for interrupting. He said the federal government perhaps could come up with a way for guaranteeing the guarantees, if you will, and the spare parts. GRANHOLM: Yes, but, still. I mean, so the government guarantees it?

You know, people are affiliated with their car. It's the largest consumer purchase they make. They have choices. They can go to another car company. Why would they take the risk?

They are not going to put tens of thousands of dollars down on a product that they aren't sure is going to give them the security, the quality that they need, because the company has declared bankruptcy.

You know, the irony about all of this is, especially with that op-ed piece that Mitt Romney ran, about letting Detroit die is, first of all, that he was in Michigan when he ran for president, saying how -- what a partner that he would be if he were president.

In fact, there was so much enthusiasm in Michigan that he actually won the primary, said those manufacturing jobs that have been lost are coming back, and all of that.

This past week, there was a lot of eyebrow-raising. There was a feeling that there was some breathtaking hypocrisy in the way he campaigned in Michigan and what he's saying now.

GRANHOLM: But the thing that's most important about this conversation is that the automakers have been restructuring and Michigan is the poster child for why this, for the evidence this is happening.

BLITZER: Let me play for you what Senator Richard Shelby said just a little while ago. He's the ranking member of the Senate Banking Committee. I'll play this clip. Listen to this.


SEN. RICHARD C. SHELBY, R-ALA.: I don't believe $25 billion will be enough. I don't believe 50 will be. I believe it will take several hundred billion and, still, they might not make it. So, I believe they've got an opportunity to go through a restructuring in Chapter 11. Here, we would like these companies to survive, but they're not going to survive. They're basically failures now, unless they have new management, new innovation and new products.


BLITZER: All right, he's a tough critic. What do you think?

GRANHOLM: First of all, he represents a state that spent millions, hundreds of millions of dollars to lure a foreign auto company into their state. But, the reality is that these companies have been restructuring. We in Michigan have lost 400,000 jobs since the year 2000 because they have been excess capacity has been eliminated, they have restructured their pipeline of vehicles. They are in the process of putting out electric vehicles, hybrid vehicles, the volt is coming online in 2010. They need to demonstrate to Congress that they have these plans in the pipeline and that what happens over the past few months is a financial crisis that has disabled them from being able to borrow and has not allowed consumers to be able to access credit either.

When you layer upon this financial crisis to the restructuring that's happening, that is what has made it impossible for them to move forward. what they're asking for is a bridge loan to be able to get to those plans that they want to be able to demonstrate. But clearly, they have to lead this nation to energy independence.

BLITZER: Here's what David Axelrod, senior adviser to the President-elect Barack Obama said on FOX earlier today, because he's speaking for the president-elect. Listen. (BEGIN VIDEO CLIP)

DAVID AXELROD, SENIOR ADVISER TO OBAMA: What we can't give is a blank check for an industry that isn't prepared to reform itself to rationalize itself and to retool for the markets of today and tomorrow.


BLITZER: That doesn't exactly sound like a huge vote of confidence in Ford, Chrysler and GM.

GRANHOLM: Well, but what he also said in that interview is that the president-elect thinks it's incredibly important to have an auto industry that is vibrant and robust and leads our nation to energy independence.

That plan, that has to be worked on. Yes, there has to be restructuring and there has been and there will be. Yes, there has to be product in the pipeline that is fuel efficient. There has been and there will be. Yes, there have to be plans to make sure that they're competitive. There will be.

But the irony is that these international companies that everyone wants us to be competitive with have countries that provide health care for their businesses. Our country does not. And that's part of Barack Obama's plan to move us forward is to make our industry competitive by providing universal access to affordable health care and that's a piece of the solution, too.

BLITZER: He also said, Axelrod, that it was really essential for these CEOs of the big three automakers next time they come and bring their restructuring plans to Washington fly commercial rather than on these private jets. That has been a pretty embarrassing public relations disaster for the big three, hasn't it?

GRANHOLM: Yes, it has. I mean clearly, symbolism is important and my guess is they will fly commercial. But obviously the most important aspect of what they have to do is demonstrate the plan of how they will be viable, how they will help to lead this nation and let me say one other quick thing, Wolf.

People have, I think, put aside the notion of the importance of the auto industry to national security. We have to have a manufacturing industry for our nation to be secure. But we also have to have a manufacturing auto industry that is producing electric vehicles and the batteries associated with those electric vehicles because right now the batteries are produced in Asia. We get our oil from the Middle East. If we don't have a robust manufacturing auto motive industry that produces solutions that make us fuel efficient and electric, then we will have outsourced all of our energy solutions.

It's a critical, national need to have these solutions in the United States for our future. BLITZER: Tom Friedman, a columnist in the "New York Times" wrote this today. He said, "I don't want to see Detroit's auto industry wiped out, but what are we supposed to do with the auto executives who fly to Washington in three separate private jets, ask for a taxpayer bailout and offer no detailed plan for their own transformation?"

Are you having a heart to heart right now, yourself, Governor Granholm, with these big three automaker executives?

GRANHOLM: Yes, the big three auto execs would agree, probably. But this was not their best week and they did not make the case in the way that they need do. They're going to have another shot and I think we're all grateful in Michigan to Congress for giving them another shot at showing where they're going. Because we know that they do have this product in the pipeline and they intend to lead the world in the solutions to energy independence.

But they weren't able to demonstrate that. Tom Friedman has got tremendous ideas about how to make our energy independent as a nation. He would be probably among the first to say that we have got to produce the batteries in this country, that we have to have the R&D in this country. That is part of what is known as distributed generation and storage of energy, through the vehicle, that will lead us to energy independence. That's the future, but that is what was not able to be expressed last week.

BLITZER: Governor Granholm, thanks very much for coming in, good luck.

GRANHOLM: You bet, thanks Wolf.

BLITZER: Coming up, is Hillary Clinton as secretary of state a done deal? We'll discuss that and more with James Carville and Ed Rollins. They're standing by live.

Also coming up, Campbell Brown. She wonders whether Barack Obama is breaking a key campaign pledge. You're going to want to hear what she's saying. LATE EDITION continues right after this.


BLITZER: And welcome back to LATE EDITION, I'm Wolf Blitzer in Washington. Political strategists Ed Rollins and James Carville, they're standing by. We'll get them in just a moment, but right now we're joined by another member of the best political team on television. Campbell Brown is the host of "CAMPBELL BROWN: NO BIAS, NO BULL." Campbell, I want to play for you something you said earlier this week on the role of lobbyists in the incoming Obama administration.


CAMPBELL BROWN, CNN ANCHOR: The Obama team is quick to point out that their rules and restrictions on lobbying ties are far stricter than any previous administration and the Obama folks concede that eliminating anyone in Washington who had ever lobbied Congress or who had a family member who lobbied Congress would be foolish. And it is true. You can argue the reality that Washington and our government is that lobbyists are often the most informed people on a given issue. But we certainly never heard President-elect Obama articulate it quite that way when he was candidate Obama.


BLITZER: All right, Campbell, so what do you think? What should the incoming administration be doing right now about lobbyists?

BROWN: Well, Wolf, I won't pass judgment there. I think it's their decision to make. But what I am pointing out is the hypocrisy, because you do have to look at what he said repeatedly on the campaign trail. I mean, this is the line that was in almost every stump speech. He would say I am in this race to tell lobbyists in Washington their days of setting the agenda in Washington are over. He said bluntly, "They will not work in my White House" in almost every stump speech.

So the "New York Times" has done a lot of reporting on this and they just roughly came up with a list of 15 names of people who are part of the Obama transition and who are taking jobs in the White House who are former lobbyists or who have ties to lobbying firms or who have family members who are lobbyists who are setting up a number of conflicts of interest.

And so look, that may be inevitable. I think I point out in Washington that often the people who are most experienced or most knowledgeable about a given issue have worked as a lobbyist on that issue, but that does not change the fact that on the campaign trail this is a promise he made and one that, apparently, he's not keeping.

BLITZER: Right now as we speak, Campbell, the Obama cabinet, the senior cabinet, it seems to be developing. It is in formation, it is in motion right now. As you look at it, what do you like, what do you don't like?

BROWN: Well, they're taking their time. They're being very deliberative about it. There is, again, the people, I'm sure, he will choose people who are qualified who he has a good relationship with who he believes he will work well with.

One thing thought I think a lot of people are noting is that at this moment given the crisis we're dealing with, this economic crisis, what's going on with the auto industry, there is a feeling among a lot of people that you talk to that there is a real absence of leadership.

President Bush traveling right now, not really in the forefront and not out there using the podium, the microphone, the platform that is the White House to talk about this issue. And Obama very much taking a back seat on this and being deferential to the president and, has said, there should be only one president at a time.

But it's leaving a lot of people wondering what's in charge and craving someone to really step up. So far Hank Paulson has been the face of all this for many Americans and I think there is going to be increasingly more pressure on President-elect Obama as much as he might want to wait until January 20th, to step up and be more vocal about what is happening earlier.

BLITZER: Campbell, thanks very much. And to our viewers, don't forget, "CAMPBELL BROWN: NO BIAS, NO BULL," it airs weeknight here on CNN at 8:00 p.m. Eastern. "NO BIAS, NO BULL."

Don't go away, we're going to talk about the week in politics with James Carville and Ed Rollins in just a moment. You're watching LATE EDITION, the last word in Sunday talk.


BLITZER: Barack Obama scheduled to roll out his economic team tomorrow including his selection for the new treasury secretary. In fact, we're now being told he scheduled a news conference tomorrow in Chicago for Noon Eastern. CNN, of course, will have live coverage.

The biggest buzz right now surrounding what some of his appointments involves Senator Hillary Clinton. She appears to be on track to become the next secretary of state. Let's talk about all these proposed appointments with two members of the best political team on television. Democratic strategist James Carville is joining us in New Orleans and Republican strategist Ed Rollins is joining us in New York. Guys, thanks very much for coming in. You're pretty happy, I take it, James, that Hillary Clinton is going to be the next secretary of state.

CARVILLE: Yeah, I mean, I think she'll do terrific and I think she had some concerns that I think the president-elect really helped address. She wasn't interested in holding the position. She wanted to do the job. I think that he's assured her that she's going to be allowed to do the job of secretary of state and I think this is a terrific thing for the country. I think she's just going to be wonderful.

BLITZER: Tell us what her concerns were, James, that she wouldn't be able to do it the way she wanted to do it or she'd sort of just be limited restricted?

CARVILLE: Well, first of all, she loves, she loves being in the United States Senate. She really likes the job that she has. And, you know, if you look at what I've been specific about, if you look at secretaries of state that oftentimes not been really running foreign policy a lot at the White House. It was started when Kissinger was there.

So I think I don't obviously know the details of her conversation but I think that she sure wanted to address with the president-elect what exactly her role would be in the State Department and that kind of stuff and from everything that I heard that he was just terrific and in the conversations and I think he very much wanted her in that job and I think it speaks very highly of him that he would want to include her after the race. I think they, obviously, came to respect each other as this fight went on.

BLITZER: She went out and campaigned a lot for him, there's no doubt about that.

CARVILLE: Over 60 times.

BLITZER: By all accounts, Ed, he will be really preoccupied with the economic crisis that is facing the United States right now and to a certain degree it frees up foreign policy and international affairs to his secretary of state and she's going to be focusing in on that. Does that make sense to you?

ROLLINS: It makes great sense. Having worked in a couple White Houses, about 60 percent of president's time can be consumed by foreign affairs and this president has to have 60 or 80 percent of his time for the next couple of years devoted to the economic crisis.

I have to say, overall, and obviously I'm part of a loyal opposition, this president has made some superb choices, if all the people being mentioned are named, including the group tomorrow. They're strong, they're bright, they are respected, even by the opposition and I think it shows some great strength on his part that he's not afraid of having very talented people, more experienced in the game than he is and I think that's a great compliment to him.

BLITZER: That national security team shaping up, not only Hillary Clinton as secretary of state but retired U.S. Marine Corps General James Jones -- and maybe Robert Gates, the incumbent secretary of defense being asked to stay on and take charge of the Pentagon. You like that, don't you?

ROLLINS: General Jones is a superb choice for this region. Your national security adviser needs to be someone of magnificent knowledge level, but also has the strength to basically take two of the most important votes the secretary of defense and the secretary of state and be their referee to make sure that the president is getting a balanced view of both of their views, which sometimes are in the opposite way.

Jones, having been the commandant of the Marine Corps, is one of the most respected men in the military, we still have a war on two fronts. And this is going to be very, very important to have someone that understands the military's perspective and can basically get us out of that mess we're in and I think he's just an extraordinary choice.

BLITZER: Will some liberals, some on the left, James, be upset if Robert Gates stays on at the Pentagon?

CARVILLE: You know, some people, there are some people who are going to be upset about anything, but I couldn't agree any more with Ed. Actually, I suggested General Jones as a potential vice presidential candidate. And not only as commandant of the Marine Corps, I would be sympathetic to him as a former marine, but he was also the head of NATO. I mean, this guy is like first class all the way.

I think you got to say that Secretary Gates has done, he's really done a good job there and I don't know what the president-elect is going to do, but I think most sensible Democrats would be perfectly happy to see some kind of continuity there for the time being.

CARVILLE: And Ed is right. This president's going to have to spend a lot of time to try to dig ourselves out of this economic hole. And to have people like Senator Clinton or General Jones, or even, if he decides, Secretary Gates, I think this is -- I think it just shows a great deal of maturity and wisdom on the part of the president- elect.

I know I feel good with people like that in office.

BLITZER: Let me correct one thing you said, though, James. You said you were a former Marine. As you know, once a Marine, always a Marine.

CARVILLE: Always a Marine.

BLITZER: So let's just -- let's be clear about that.


CARVILLE: There you go.

BLITZER: Ed, what do you think about this economic team that seems to be shaping up, Tim Geithner, the president of the Federal Reserve in New York, expected to be announced tomorrow as the secretary of the Treasury, and Larry Summers, the former Treasury secretary, expected to run the National Economic Council in the White House; Bill Richardson, the commerce secretary, that announcement probably coming after Thanksgiving?

ROLLINS: Another -- another, all-star team. I mean, you know, once again, different philosophy than I have, but it doesn't matter. My team didn't win. His team won.

These are the best people he has on his side. They're going to push forward a very aggressive change program.

I think the president (sic) started that in his radio speech yesterday, and I think that he needs the best team he can. And what amazes me is how widely applauded these people are by people on both sides who know the business so much better than I do.

BLITZER: What do you think, James? CARVILLE: Yes, I mean, look, the -- Larry Summers, and from everything I know of Mr. Geithner, he's really a first-class intellect. And, look, there's a lot of problems out there, and I think it's good that, you know, we're getting this kind of talent in there.

Look, I just hope they can solve it. I mean -- you know, I guess if anybody can, he's putting together a team of people that really can. But these problems strike me as being very, very deep and very fundamental. So at least we're going to throw the best we got at it.

BLITZER: All right. We're going to talk a little bit more about this, and what all of this says about the president-elect of the United States, Barack Obama.

I want both of you to stand by. We have a lot more to talk about. Also, the strategy for Republicans, going forward. How should Republican members of Congress respond to what President-elect Obama is proposing?

Stay with us. We'll be right back.



PRESIDENT-ELECT BARACK OBAMA: I have already directed my economic team to come up with an economic recovery plan that will mean 2.5 million more jobs by January of 2011.


BLITZER: President-elect Obama, speaking yesterday, unveiling, in, sort of, broad terms what he plans on doing in the coming weeks.

We're back with two of the best in the business, Democratic strategist James Carville and Republican strategist Ed Rollins.

We're talking, here, at least according to sources, perhaps hundreds of billions of dollars, Ed, for a second economic stimulus package to create thousands, millions of jobs, potentially.

How should the Republicans in Congress react to this vision from Obama?

ROLLINS: I think they have to question it, but I think they have to do it in a responsible way. I mean, they're not a part of the process any more. They've lost enough seats in this last election that the Democrats can push through whatever they want without our help.

But I do think that we have an opportunity to be the loyal opposition. What are these things going to cost? How are they going to work?

You know, it's a very ambitious program. It's going to cost a lot of tax dollars over a long period of time. How are we going to pay for it? Those are serious questions that, I think, we need to raise. But to think that we're going to stop it, or to just dump on every program the president puts forth, I think, is irresponsible.

BLITZER: What do you think, James?

Because this is the key issue, right now, creating jobs. So far this year -- and the year isn't over with, yet 1.2 million jobs have been lost in the United States.

CARVILLE: Right. Well, yes. And I think that the idea that they're going to -- hopefully, and what he's talking about is infrastructure improvements. And that, you know, strikes me as a really good way to go about this, is you're creating jobs and you're creating things we -- that we need.

I mean, you can imagine the high-speed rail we need here in Louisiana, the coastal restoration needs. And if this stuff gets done, you're going to put a lot of people to work and you're going to create some demand out there.

And I think that they're very afraid of deflation. And, you know, I mean, Ed's right. I mean, Republicans have some responsibility to make sure that this stuff gets done right. And the Democrats have the votes to do it. And I suspect the new president, with the team -- with the people he put together, has a sense that, you know, give these guys a chance to get this thing going again. And I suspect the Congress will.

BLITZER: And, you know, at the same time, though, Ed -- and I don't know how much of a concern this is -- it nearly -- the money's going to have to come from somewhere. And that means increasing the national debt.

ROLLINS: Well, I think -- I think there's no question on the national debt. We supposedly were the fiscal party, and we ran the debt up, too.

So, I think the reality is to make sure the money is spent well. I'm all for infrastructure. I think we have highways; we have all sorts of things that have fallen apart.

My father was a shipyard worker, worked in a federal shipyard. We made a decision to shut down all the federal shipyards in the '80s, and I think we've we cost a lot of very important jobs and job training programs.

I think rebuilding our infrastructure will train young people, give them a career that's going to be a long-term career, and create real jobs.

BLITZER: According to all our poll numbers, James, expectations for Barack Obama are enormous, right now. People think he's going to turn things around relatively quickly.

How much of a political problem is this for the incoming president?

CARVILLE: I think it's potentially enormous. And, you know, one of the things that the incoming president has to do -- and I'm sure David and Rahm and all of them are very cognizant of this -- they want to give people hope, but you don't want to increase expectations beyond that which is possible.

I mean, and Ed's right. The infrastructure is a good expense of money money, and it's all right to use that for debt because future generations are going to reap the benefits of it.

But it's pretty -- you just can't throw a switch and start doing this kind of stuff overnight.

So it is a problem because you don't want to -- you want to tell people there's hope and that you can change things and things can get better. At the same time, you have to be realistic of what's going on in this economy.

So I think it's an enormous problem, and I think it's one that they're very, very cognizant of, and it's a very, very delicate balancing act that the administration's going to have to pull off, here.

BLITZER: Ed, as you look at the GOP landscape, right now, in the short-term, we're talking the next weeks and months, who are the leaders for the Republican Party?

ROLLINS: Well, for the most -- I mean, obviously, Ronald Reagan is gone, and he may not be forgotten, but he's gone. But, equally as important, the Bushes are gone; the Doles are gone; John McCain is gone.

Those have been the leaders for a very significant period of time. We need to develop new leaders. And my sense is they'll come from the governors.

I think our next nominee in four years, or eight years, who may have a chance of winning the presidency will be one of the governors or former governors.

I think we've got to focus out there, away from Washington, for a while. We've got to try and win some House seats back in 2010 and some of these Senate seats. But I think, really, our party's going to be rebuilt at the grassroots, back at the states.

BLITZER: You're living back in Louisiana right now, James. Bobby Jindal, the governor, a Republican governor of Louisiana -- he's in his 30s. He's very popular, and a lot of people are looking to him.

BLITZER: If you were giving advice to any of these potential Republicans governors out there, whether Tim Pawlenty of Minnesota or Mark Sanford of South Carolina, Charlie Crist of Florida, Sarah Palin of Alaska or Bobby Jindal, what advice would you give them looking ahead, assuming they have national ambitions? CARVILLE: Well, just as an interesting side note, Bobby Jindal is currently not in Louisiana. He's in Iowa. I don't know what that mean, but it means something.

BLITZER: Could be a coincidence.

CARVILLE: Could be a coincidence, but I think it's probably a little more than that. I think Ed is right. I think the real advantage that these governors have in the Republican Party is they're not part of Washington, and the Republicans don't much care for the Washington Republicans.

So, if I were advising any of these Republican governors, I would say keep your distance from the old style Washington Republicans because obviously, this is not what they're looking for either in the country or the Republican Party.

But they're going to have to craft a different kind of message, and they're also going to have to get some of this opposition to what the new president is doing. I mean, they have to run against him in 2012. There's a limit to what bipartisanship can accomplish here.

BLITZER: Ed, you worked for Huckabee this time around. Didn't exactly work out, although he did win Iowa, had a pretty impressive race. Would you say Huckabee or Romney or Giuliani or Fred Thompson, any of the other Republican candidates who didn't get the nomination this time around have a future in 2012?

ROLLINS: I think both Huckabee and Romney will run again, whether it's in 2012 or beyond that. They're young. I think Giuliani is looking for New York options. I think Fred Thompson already announced he's going to go back to acting, which is probably a better place for him. He does that much better than he did his politics.

BLITZER: Guys, we're going to leave it right there on that note. Thanks very much for coming in . Both of you have a great Thanksgiving holiday coming up this week.

And just ahead, former presidential candidate Mike Huckabee, we just spoke about him. He tells us what he would do if Barack Obama called him and asked for some help. And don't forget to tune in on Thanksgiving night for CNN "Heroes," an all-star tribute hosted by our own Anderson Cooper. That's this coming Thursday night, 9:00 p.m. Eastern, only here on CNN. LATE EDITION continues after this.


BLITZER: Former Republican presidential candidate Mike Huckabee fell short in his bid for the White House. But he's been keeping busy with a new book. This week in "THE SITUATION ROOM," Huckabee shared his thoughts about working with the new president and the historic nature of the 2008 election.


BLITZER: Is it time to put politics aside right now, if you're a good, strong, conservative Republican, and do what you can to help this president-elect?

FORMER GOV. MIKE HUCKABEE, R-ARK.: Absolutely. And I've made some comments recently that Barack Obama was not my choice, but he will be my president on January 20th. I feel that way. This is my country. I love it. I want it to do well. And so if we elect a president and he's inaugurated, I want him to be an effective, good president for every American -- and that includes me.

BLITZER: So if he were to call -- reach out -- he's reaching out to Republicans and others. If he were to call you and say you know what, I need your help, can you give me some help on a specific issue that may be of interest to him and to you, would you help him?

HUCKABEE: You know, I think he's calling me right now. My cell's going off.


BLITZER: Is that him?

HUCKABEE: No. It's --

BLITZER: You would take his call and you would help him, right?

HUCKABEE: You know, I would take his call. I don't think he's going to wants me to be part of his administration. That's (INAUDIBLE) --

BLITZER: No. I'm not saying that. I'm just saying if he wanted some advice from you.

HUCKABEE: Oh, yes. I would certainly do that, because, again, I want him to do well. And if I think he's taking us in a wrong direction -- if he's going to raise taxes or if he's going to do something that threatens the sanctity of life or the Second Amendment, you know, I'm going to be outspoken about that. But I'm going to give him the benefit of the doubt. Let's let him become president and start his administration. Nobody should (INAUDIBLE) of that. BLITZER: This is an historic moment in our country right now. You did very well in Arkansas when you were running for governor with African-Americans.

HUCKABEE: I did -- 48 percent of the vote of African-Americans in my state. And it was not lost on me, of the historical significance of this election. As a child, growing up in the South, seeing the evil of segregation -- it was horrible what happened in this country. It's inexcusable. It's a part of our history that I'm embarrassed by as an American.

But I'm also proud to see us move to a place where, as I've said this, 50 years ago, Barack Obama, at best, could have served coffee in the White House. Now he will be walking in as its primary resident. I think that's a great moment for America. Forget politics.


HUCKABEE: That's just a great American moment. BLITZER: It's pretty amazing, when you think about it.


BLITZER: Mike Huckabee speaking with me earlier. Up next, two key senators on Obama's new jobs plan and his cabinet picks and what to do about the auto industry. LATE EDITION will be right back.


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


PELOSI: Until they show us the plan, we cannot show them the money.

BLITZER: Congress tells the U.S. auto industry to come back with a plan. But will it be too little, too late? We'll ask two key U.S. senators, Democrat Carl Levin of Michigan and Republican Kay Bailey Hutchison of Texas.

A late rally in the stock market. Can Barack Obama's new economic team turn the financial downturn around? We'll ask two economic experts, former presidential candidate Steve Forbes and former labor secretary Robert Reich.

Will she or won't she? Will Hillary Clinton abandon the Senate for a seat in the cabinet? Has Barack Obama even offered her the job? We'll go for the answers with three of the best political on television. The second hour of LATE EDITION starts right now.


BLITZER: And welcome back to LATE EDITION. This week, Congress left for vacation without passing a rescue plan for the big three auto industry. Can the big three survive until a new administration takes over on January 20th?

Let's discuss this and a lot more with two special guests, Republican Senator Kay Bailey Hutchison is joining us from Dallas, Texas. And with me here in our Washington studio is Democratic Senator Carl Levin of Michigan. That's the home of the U.S. auto industry, as all of our viewers know.

Senator Levin, Mitt Romney, the former governor of Massachusetts, Republican presidential candidate, he was here on LATE EDITION in the last hour, and he said the auto industry, the American automakers, they have their own -- they have themselves to blame for this mess, and he went on and said this.


ROMNEY: GM has lost point after point of market share. 2002, they had roughly 30 percent of the market. They're down to about 22 percent of the market now. They keep losing market share. They keep losing jobs. Putting money into that kind of a structure is not the right answer. I think Washington got it right this week.


BLITZER: All right. What would you say to the son of Michigan, his father, you know, was the former governor of your state?

LEVIN: Well, the plight of the auto industry is global. Headlines facing a showdown, China's auto industry presses for a bailout from Beijing. Headline, Europe carmakers seek $54 billion from Europe. So, this is a global problem and we might as well address it the way other countries are going to address it.

BLITZER: But why are people -- this market share for GM, as he says, in the '60s, it was 50 percent, now it's down to 20 percent. Why are Americans reluctant to buy American cars?

LEVIN: Americans actually were doing much better in terms of buying American cars until this recent problem with credit. GM was holding its own. Ford was holding its own. The slight reductions that you've seen recently in market share have to do with cheaper labor and other cars coming from places which can make them more cheaply.

But the focus now has got to be whether or not, when this recession is over, whether or not we want an auto industry in this country or -- and whether we're going to do what every other country in the world does, which is to fight for manufacturing in their country. That's the issue in front of us.

BLITZER: Senator Kay Bailey Hutchison, what do you think? Can the U.S. allow the U.S. auto manufacturers to go down?

HUTCHISON: I think that what Congress said is come forward with a plan so that we know we are not throwing taxpayer dollars at something that has no chance of success.

And I think that means everyone is going to have to give. I think -- you've heard it everywhere that there needs to be an executive compensation difference. There needs to be something done with the unions, probably something with the auto dealers, the franchisees. I think if they come forward with a plan, that Congress will support it if it is from the fund that we have already located, which Senator Levin, Senator Bond, Senator Voinovich and others have introduced and support, and I think the president would sign.

BLITZER: That's from the Department of Energy bill that passed last year, $25 billion. But Nancy Pelosi, the speaker of the House, says that that's not a good idea. They should use the $25 billion from the $700 billion financial market stabilization legislation. Listen to Nancy Pelosi.

(BEGIN VIDEO CLIP) PELOSI: The point about the DOE money, is its purpose is advanced technology. It isn't cover my shortfall. And so, unless you're going to use that money for its purpose, you almost cannot get to viability. That's why we're saying let that money be used for its purpose. (END VIDEO CLIP)

BLITZER: The purpose was to make -- to improve global warming, if you will, and the environment, build greener cars.

HUTCHISON: I think what Senator Levin and his group are doing would have the money come back for the long term for exactly those purposes.

But in the short term, they are not going to be able to use that money for research and development, these technologies and the improved efficiencies. They're trying to survive. So, why not do the bridge loan from that money and put the cost from there, pay it back into that fund so that when they do get their feet on the ground they will be able to do some of the more innovative things that will make them more competitive?

BLITZER: Sounds reasonable, Senator Levin. What do you think?

LEVIN: Well, there's $700 billion there, part of which, 4 percent of which should be used, in our judgment, most Democrats, at least, who favor support for the industry believe that 4 percent of that fund should be used --

BLITZER: $25 billion.

LEVIN: The $25 billion should be used for bridge loan. However, the president refuses to do that. The president says no, go over to this 136 program.

BLITZER: The energy legislation.

LEVIN: The energy legislation. OK, so now the question is are we going to allow this industry to go under? Because there's a disagreement as to the source of $25 billion bridge loan.

The president says he favors a bridge loan. Barack Obama says he favors a bridge loan. Both the leaders of the Senate say they favor a bridge loan. The speaker of the House says she favors a bridge loan. For heaven's sakes, we could not allow, I hope, should not allow this industry to go under because there's a dispute over the source. Everyone agrees there's got to be a plan, a plan for financial viability.

BLITZER: So you disagree with Nancy Pelosi?

LEVIN: I disagree that -- yes, I disagree with her that if this is the only way we can have a bridge loan because the president has rejected the better way, nonetheless, he's rejected it.

BLITZER: These automakers, they have to come back here to Washington on, what, December 2nd?

LEVIN: By December 2nd.

BLITZER: By December 2nd and offer a dramatic restructuring plan that will reassure the American taxpayers and the Congress they know what they're doing. Do you believe they can come up with that plan?

LEVIN: I do, and they should. I think everybody who favors a bridge loan believes they need to come up with this plan.

BLITZER: Can they do it without filing Chapter 11?

LEVIN: They not only can do it, if they file Chapter 11 or Chapter 7, either form of bankruptcy, that's going to end this auto industry because people aren't going to buy cars from an industry or company that is going to be in bankruptcy because of the warranty issues not being there when they need them.

BLITZER: Is there any way the federal government can guarantee the warranties, which is what Mitt Romney proposed in the last hour?

LEVIN: Well, Mitt Romney proposed bankruptcy and even the speaker opposes bankruptcy. I want to give credit to the speaker for opposing bankruptcy as an option. It is not an option for an industry.

BLITZER: Do you believe, Senator Kay Bailey Hutchison, that these big three American automakers can restructure without going through some formal chapter 11 procedure?

HUTCHISON: I think they have the capability of doing it, but it is going to be very tough, because everyone is going to have to give. Their stockholders, the unions, the executives, and their compensation packages. Everyone is going to have to come together and say, if we're going to take taxpayer money, we must all give something to make sure that this is successful.

And I think it should come from the money that has already been allocated, which couldn't possibly be used in the short term. And if we have the finance package going, and we get credit out there, that is also very important for the auto industry.

BLITZER: Because if people --

HUTCHISON: People can't borrow right now and they're not buying cars for that reason.

BLITZER: Senator Levin, how close is GM, Ford, and Chrysler to collapse?

LEVIN: Well, I think they're in fragile financial shape. A number of companies around the world are, and other governments aren't going to let those companies go under because of the importance of them to manufacturing.

BLITZER: Which is the worst shape? LEVIN: I'm not going to speculate.

BLITZER: How much time is there?

LEVIN: I can't -- I think months before their cash actually runs out, but it may differ from company to company. BLITZER: So, this is a limited time, a very short period of time before the federal government has to take action.

LEVIN: It is, and the risks huge, not just to our economy but to jobs. Barack Obama yesterday did a very bold thing. He talked about...

BLITZER: We're going to talk about that.

LEVIN: We need to do that.

BLITZER: When they come back here in December, the big automakers, the CEOs, should they fly commercial or their own private little jets?

LEVIN: Obviously they should fly commercial. We can't let that kind of issue distract us from the fact we have 3 million jobs at stake here. We've got an industrial base here for our security, our defense. We've got a manufacturing issue. Do we want to be involved in manufacturing or can we, as a great country, not have a major part of the manufacturing base? Those are the major issues.

BLITZER: All right, guys, stand by, both senators, because we have a lot more to talk about. We'll also get into politics a bit. You'll hear their opinions on what appears to be an emerging Obama cabinet.

And later, President Bush is preparing to pose with other world leaders in the coming moments. Those famous funny shirt photo opportunities, this time in Peru. You're going to see what they're wearing today. Stay with us. LATE EDITION continues after this.


BLITZER: Welcome back to LATE EDITION. I'm Wolf Blitzer in Washington. We're continuing our conversation with Senators Kay Bailey Hutchison of Texas and Carl Levin of Michigan. Senator Hutchison, listen to what Barack Obama, the president-elect, said yesterday in proposing a huge economic stimulus package to be approved, he hopes, in the coming weeks. Listen to this.


OBAMA: We'll put people back to work, rebuilding our public roads and bridges, modernizing schools that are failing children, and building wind farms and solar panels, fuel-efficient cars and the alternative technologies that can free us from our dependence on foreign oil and keep our economy competitive in the years ahead.


BLITZER: His proposal, as you know, Senator Hutchison, would create 2.5 million new jobs by January of 2011, and some say it could cost $500 billion, $600 billion, maybe $700 billion. Are you on board? HUTCHISON: Well, I'm sure we have to see what he is proposing and how it would be allocated. I do not want to get into a big earmark war in Congress over where the money goes. And I certainly don't want to leave it to the agencies to make those decisions. If there were some kind of a population base or where the states could make the decisions on what their priorities are and it would create jobs -- and by the way, I do agree with Carl Levin that we must do everything we can to keep jobs and manufacturing jobs in this country.

We can't maintain the greatest economy on earth if we cannot make things, whether it's cars or airplanes or other products. So, I think that I would really want to see, first, if we need to put that much more in to the debt that we already have, and secondly, maybe how things are working if the credit is getting out to consumers, how much do we really need to put into another stimulus.

BLITZER: What do you think, $500 billion, $600 billion? What do you think, Senator Levin?

LEVIN: Well, we need to have a major stimulus package, and the president-elect is exactly right on that. He's got a bold plan. We don't know the details yet, but it's obviously -- BLITZER: Like the new Congress, which is sworn in in early January basically to approve it by the time he's inaugurated on January 20th. Is that realistic?

LEVIN: I think it depends on whether or not the detail is such that it can command the support of the majority. But that's a bold vision, is what is important here. The willingness to put money into infrastructure.

But going back if we could just to autos just for a minute, there's a bold vision for 2.5 million new jobs. If this auto industry goes under, we're going to lose 3 million jobs. His vision would be swamped by the loss of this auto industry, and I would hope -- obviously, it's going to take the big three and the UAW coming together.

Everyone's got to put their shoulder to the wheel here literally and figuratively. But we also, I think it would be very helpful if the president-elect would become more involved in resolving the issue over the source of the funds. You heard a few moments ago --

BLITZER: Let me just pin you on this -- when you say get more involved right now, because we heard similar criticisms from Senator Chris Dodd, the chairman of the Banking Committee over the past couple days. What do you want Barack Obama to be doing right now?

LEVIN: I want him to offer his assistance. He is a person who can really bring people together. We heard just in the last couple minutes that some people who support a loan want it to come from one place. Other people want it to come from another place. Everyone agrees that there's got to be a plan. Everyone agrees there's got to be limits on executive compensation. There's agreement on that. The disagreement is really the source for the funds. That cannot be allowed to -- BLITZER: So you want him to weigh in.

LEVIN: I would like him at least offer to become more involved, and I think that offer would be welcomed, not just by the Democrats, the House and the Senate, but also by the White House itself that has a different view on it.

BLITZER: Because Senator Hutchison, as you know, President-elect Obama has been sensitive to this fact that the United States should have only one president at a time and until January 20th, it's President Bush. You agree with Senator Levin that it's time for Barack Obama in this transition to get more assertive?

HUTCHISON: Well, I think he's playing it just right. I think certainly we all want to know what his views are because we know by January 20th that whatever his views are probably are going to have great weight.

But I think he is playing it right to not jump in and be critical of what the president is doing. And I think on this particular point, the president is right and I think there is a very bipartisan view about using money that could possibly be used effectively right now, let it be recycled through and try keep an eye on the taxpayers. We really need to always have an upside for the taxpayers.

BLITZER: There's another interesting development, Senator Levin, unfolding. The "New York Times" reports this today involving taxes, a subject close to everyone's heart.

"In light of the downturn, Mr. Obama is also said to be reconsidering a key campaign pledge: his proposal to repeal the Bush tax cuts for the wealthiest Americans. According to several people familiar with the discussions, he might instead let those tax cuts expire as scheduled in 2011, effectively delaying any tax increase while he gives his stimulus plan a chance to work."

Are you with him on that, if, in fact, that's his proposal, just let the Bush tax cuts stay in effect through 2011?

LEVIN: I personally would not in terms of the upper bracket tax cuts. I think we've got to drop those tax cuts for a number of reasons. We just cannot afford to continue them. We surely cannot afford to make them permanent, as what the president -- current president wants to do. But I just think we're going to have to move more swiftly and not allow that loss of revenue to continue at the upper brackets.

BLITZER: I know Senator Kay Bailey Hutchison disagrees, because she believes they should be made permanent, the Bush tax cuts. We're going to leave it on that point. Senator Hutchison, thanks very much for coming in as usual.

HUTCHISON: Thank you. You're right about that.

BLITZER: Senator Levin, good luck to everyone out there in Michigan and everywhere else. And good luck in Texas, as well. In just a few moments, we're going to get the latest on who's in, who's out as far as the running for a cabinet post is concerned. Three of best political team on television standing by live.

Also straight ahead, Steve Forbes and Robert Reich on the economic crisis here in the United States. LATE EDITION continues after this.


BLITZER: Welcome back to "Late Edition." I'm Wolf Blitzer in Washington.

We've heard from a lot of politicians, today, on how they feel the United States should be addressing its economy right now. For a change, let's talk about the economy with a couple of experts on economic policy.

Joining us now, Steve Forbes. He ran for the Republican presidential nomination back in '96 and 2000. He's the editor-in- chief of Forbes Magazine. He's in our New York bureau.

And Robert Reich was the secretary of labor during the Clinton administration. He's joining us from Berkeley, where he teaches public policy at the University of California. His latest book, by the way, is called "Supercapitalism." It's just been released in paperback.

Gentlemen, thanks very much for coming in.

Steve Forbes, I'll start with you. Yesterday we heard Barack Obama, the president-elect, unveil a new economic stimulus package that he hopes could create about 2.5 million new jobs. Listen to what he said.


OBAMA: I have already directed my economic team to come up with an economic recovery team that will mean 2.5 million more jobs by January of 2011. It will be a two-year, nationwide effort to jump- start job creation in America and lay the foundation for a strong and growing economy.


BLITZER: No price tag announced for that economic stimulus package, Steve Forbes, but some say it could be $500 billion, $700 billion. Is it money well spent?

FORBES: Well, Japan had a lot of these stimulus packages, and while some of the projects, I'm sure, will be worthwhile, that's not going to get this economy back on its feet.

First he has to deal with the credit crisis. There's an arcane accounting rule that's now destroying insurance companies, after it destroyed banks, called mark-to-market. If he wants instant stimulus for the housing market, he should have Freddie and Fannie guarantee, explicitly, their debt and announce we're going to refinance mortgages at 4.5 percent to 5 percent and do away -- bring back the uptick rule on short selling.

And on the economic side, if you reduce tax rates, say, for the middle class, from a rate of 25 percent to 15 percent, reduce business taxes, which are now the second worst in the developed world, from 35 percent to 25 percent, those measures together would help end the credit crisis and get the economy moving again.

BLITZER: All right. A lot to digest there. I know Robert Reich probably disagrees on most of it, but go ahead.


REICH: Well, look, I don't want to take Steve on. I think that the most important thing right now, Wolf, is to understand that there's not enough buying power in the economy right now.

The middle class has basically come to the end of their ropes. They can't go into any more debt. Housing prices have declined, and therefore all the home equity loans. And refinancing is basically impossible.

So the only thing that people can do, right now, is rely on government, and government is the spender of last resort. We're going to, and I hope, see -- I don't have any inside knowledge on this -- a stimulus package in the range of $500 billion to $700 billion. That's what I would expect. And that's about 4 percent of the gross national product.

That's what we need to get the economy going again.

BLITZER: All right. Let me bring back Steve Forbes. And I'm going to play for you a sound bite of what Henry Paulson, the Treasury secretary, said this week, out in California, on Thursday. Listen to this.


SECRETARY OF THE TREASURY HENRY M. PAULSON JR.: By proactively addressing the problems we saw coming and being pragmatic enough to change strategy in the face of changed facts, and despite the inevitable criticism, we prevented a far worse financial crisis that would have severely damaged our economy and the economic being of all Americans.


BLITZER: Steve Forbes, do you have confidence in Paulson?

FORBES: No, sadly, Wolf. He's about the worst Treasury secretary we've had in modern times. For example, this arcane accounting rule that I mentioned, mark- to-market, which has destroyed bank balance sheets, if we'd had that when we had the S&L crisis in the early 90s, we would have had a Great Depression then.

It's now wreaking havoc in the insurance industry. Nobody pays attention to it, but it's devastating. Repeal it, or at least suspend the thing.

And in terms of reviving the housing market, Fannie and Freddie are now owned by the federal government, so get over it; explicitly guarantee that debt, and then announce those two agencies are going to start issuing mortgages, buying mortgages with a 30-year fixed rate of 4.5 percent, 5 percent.

After all, the Treasury can now borrow at 30 years with a little over 3 percent, so that's doable. You do that, housing prices start to go up; people can refinance; monthly payments go down. What is there to lose?

BLITZER: All right. I want you to respond, Robert Reich, to both of those proposals.

But the first question, Paulson -- do you have confidence in him?

REICH: Well, look, he's in a very, very difficult position. I don't have a great deal of confidence in his policies. I think that the great bailout that he engineered was really sold to Congress on false pretenses.

He said he was going to establish a reverse auction to establish the values of a lot of these securities, mortgage-backed securities. And he switched courses to recapitalize banks, throw money in the direction of banks. And now he's saying, basically, he's going to punt on that, as well.

So Paulson has not been very transparent. He's been very opaque. And it has riled markets.

Now, what we need to do, and here's where I might agree with Steve, at least to some extent, what we need to do is make sure that this bank bailout money is used not for executive compensation and bonuses and not for dividends for shareholders, and not for allowing banks to buy up other enterprises, but to get money down to Main Street so that small businesses and troubled home owners, student who is need additional credit and others, can get the money they need, right now, if they are credit-worthy risks.

BLITZER: Steve Forbes, is Citigroup, this huge banking firm -- is it looking like it could possibly be going down?

FORBES: Well, it's in deep, deep trouble. You can see it in the stock price. When that you have kind of crash in stock prices, boy, that is a bad signal.

But I think Citi is reflective of a larger problem out there. And that is, these balance sheets have been, gratuitously, many of them, destroyed by artificially marking down the value of their assets.

And this is, again, one of the most boring subjects in the world, but it is something that is easily correctable. The Europeans have backed off from it.

So, in the case of Citi, they're probably going to have to make an injection. They might force it to eventually sell some of their assets. But you've got to deal, first, with the source of the crisis.

Banks aren't going to lend, and insurance companies are certainly not going to lend in an environment where they fear for their survival.

So, get rid of these crazy accounting rules like mark-to-market and have Fannie and Freddie now finally play a constructive role in the housing crisis by offering 4.5 percent, 5 percent mortgages, and have Henry Paulson do at least one thing right, and that is, have the government explicitly guarantee the debt of Fannie and Freddie.

BLITZER: All right. Robert Reich, do you agree on those points?

REICH: Not entirely. I think Steve Forbes' idea about getting rid of mark-to-market rules is not quite right, because one of the problem we've had is that we've been deregulating like mad. There's insufficient capitalization.

A lot of these big banks, right now, are struggling because their creditors and their investors really are seeing that there's not much there in the bank. You know, a lot of these toxic securities can't be relied upon.

You know, the real interesting question, Wolf, is why should we be bailing out Wall Street at all, when we are going -- you know, twisting into pretzels about bailing out big companies like General Motors.

I mean, why not subject every one of these big, big companies to some modified form of Chapter 11; let them reorganize themselves; make sure that executives and employees an shareholders and creditors all put something into the pot.

REICH: And if necessary, if there are big social costs and benefits at stake, have taxpayers bear some of the residual burden.

BLITZER: Steve Forbes, what do you think? Should the federal government bail out the big three automakers?

FORBES: Well, the big three automakers, I think it's very clear, need very real structure changes, including something, that is revising fuel efficiency standards.

Right now, those companies make very good cars overseas, small, fuel efficient, but they're not allowed to bring them into the United States and have them count towards their own U.S. fuel efficiency standards.

So, they lose their shirts in North America and they've got to revise their labor agreements as well. But if they bring those kinds of structural changes, these companies outside of North America in normal times are very strong, profitable auto companies. So structural changes in North America, they can get back on their feet again.

BLITZER: Take look at these numbers. I'm going to put them up on the screen, both of you. The Dow Jones Industrial average, a little bit more than a year ago, it reached a high of 14,164. Right now, it closed on Friday, 8,046. That's, what, a 40 percent drop, Steve Forbes.

What's going on here? Because people are losing their portfolios, their pensions, their 401(k)s. It's an enormous, an enormous drain on the country's wealth.

FORBES: Well, it is, and it's a reflection of how abysmally the administration has handled the credit crisis. First, it weakened the dollar, which made the housing bubble much weaker than it should have been. This arcane mark to market rule has devastated bank balance sheets. When historians look back, they're going to say how in the world did they let that happen? Fannie and Freddie, not using them properly, and another thing they haven't touched on is short selling. One of the dumbest things the Securities & Exchange Commission was eliminate the up tick rule, which said you have to wait for stock to go up in price, before you can sell it short. They eliminated that, market volatility ballooned.

BLITZER: Go ahead, Robert Reich. REICH: I disagree with Steve on this. I think the major problem here is that consumers were responsible for 77 percent of the economic activity in the United States, consumers basically reached the end of their ropes. Median wages have been dropping. Median family earnings have been dropping since 2000. Consumers have gone into debt. They could manage that debt as long as housing prices were going up. They could refinance and get home equity loans.

But the minute that housing bubble burst, consumers had no more money in their pockets. And you cannot run an economy where median wages are dropping and most of the benefits of the economy are going to the very top.

FORBES: Wolf, you cannot have a functioning economy if the credit system is broken, which it is today. And the $500 billion, $700 billion stimulus package, when you're talking about assets of $40 trillion to $50 trillion, is just a drop in the bucket.

It didn't work for Japan, it didn't pull us out of the depression in the '30s. It won't today. We've got to fix the credit system, and it doesn't take much to fix it if they do some of the opposite things of what Hank Paulson has done, like on mark to market, like using Freddie and Fannie and this crazy up tick rule. Bring it back again.

BLITZER: Very quickly, because we're out of time. Steve Forbes, first to you, Timothy Geithner, the new secretary of the treasury. It looks like that is going to happen tomorrow and Larry Summers, the former treasury secretary in the Clinton administration heading the National Economic Council in the Obama White House. Steve Forbes, are you confident in these two guys?

FORBES: Well, they both believe free trade, which I think is a very positive thing, but I want to see how they deal, first with the dollar, then this mark to market thing. If they deal effectively with those two things and utilize Fannie and Freddie, they'll be heroes. I'll gladly buy them a free lunch.

BLITZER: What about you, Robert Reich?

REICH: Well Geithner and Summers are a terrific, powerful team. I think they'll put the financial market exactly in the right direction. Peter Orszag at OMB, you didn't mention, he is also very, very talented, very competent.

But most importantly, we have a new president-elect who understands that it's not just about finance, it's not just about credit, it's about Main Street. It's about helping people get back on track and reversing the downward slide in median wages.

Again, I want to emphasize, one of the most important things, you can't have a recovery unless you get that median wage slide reversed and people can actually go and buy things. Credit can be -- the whole credit market can be resolved and improved, but unless people have the power to actually borrow, you know, you're whistling in the wrong direction.

BLITZER: Robert Reich, you've been an adviser to Barack Obama. You supported him. You coming back into the government?

REICH: No. I have no present plans to do that.

BLITZER: Sounds very diplomatic, the word present plans, always diplomatic. All right guys, thanks very much.

REICH: Thank you.

BLITZER: Robert Reich and Steve Forbes.

FORBES: Thanks, Wolf.

BLITZER: Always a good, intelligent discussion.

Straight ahead, the inside story on what's really going on with the Obama transition with three of the best political team on television. LATE EDITION continues after this.


BLITZER: Lots of news trickling out this week on the transition to power. So let's get right to it. Joining us, our CNN White House correspondent, Ed Henry. He's covering the transition in Chicago. And with us here in Washington, our CNN senior political analyst, Gloria Borger, and our CNN senior correspondent, Joe Johns. Guys, thanks very much.

Ed, let's talk about what we can expect. I understand there's going to be a news conference in Chicago at Noon Eastern tomorrow?

HENRY: That's right. We're going to see both the president- elect and the vice president-elect. They'll be unveiling the economic team. We know that Lawrence Summers will be there and the head of the national economic council, Tim Geithner as well as the incoming treasury secretary, to be nominated officially tomorrow.

You saw that rally on Wall Street on Friday as news started dribbling out about Geithner, the head of the New York Fed, so he's a known quantity on Wall Street.

And the point of rolling this out first before the national security team, which as you know traditionally has been first the lineup is that Barack Obama realizes this financial crisis is deepening.

He needs to get his team out there. There's a power vacuum right now with President Bush as a lame duck, so he wants to get his lineup out there, try to reassure the markets. And that's why he's also talking about an economic stimulus package than is much, much bigger than he talked about on the campaign trail.

BLITZER: I assume the hope is, Gloria, in showing off this new economic team tomorrow it's going to sort of stabilize the Dow Jones Industrials, the stock market a little bit, as Timothy Geithner's name when it was leaked on Friday, that we saw a rally 500 points going up in the hour after word was released. BORGER: Yes, they really do want to do that. And also there's a sense that the outgoing Treasury Secretary Paulson now has somebody specific that he can be dealing with in this transition.

BLITZER: They've been dealing together for a while. Because Geithner is the president of the Federal Reserve in New York.

BORGER: So, they know each other and they can deal with each other. And then Obama also has Larry Summers there who will be inside the White House with him, who has experience himself at the Treasury. So I think this is the way to really smooth the transition from one administration to another because we're in the middle of a crisis, and so there isn't really any time.

BLITZER: Because the stakes really are enormous right now. As Ed just mentioned, Joe, the president-elect yesterday unveiled the broad outlines of a second economic stimulus package to create what he hopes to be 2.5 million new jobs. We've lost in the United States 1.2 million jobs so far this year alone. It's an ambitious plan. It's going to cost hundreds and hundreds of billions of dollars.

JOHNS: It certainly is. You also have the issue of the automotive industry out there we heard so much about last week. It is hard to see how Congress might not deal with that in some form, anyway.

But one of the things I've heard from talking to economists and others is that this president-elect will also really have to worry about the issue of getting the credit markets going again, perhaps even before that stimulus package, because from that, everything else flows through. He's got a lot on his plate. It should be a real challenge for him. BORGER: And, you know, we're probably not going to see the Bush tax cuts end as quickly as Barack Obama might have wanted during the campaign.

BLITZER: For the wealthiest.

BORGER: For the wealthiest. It looks like those are set to expire in 2010 and they're probably not going to be repealed.

BLITZER: Ed Henry, you're our White House correspondent. Take a look at this picture. I don't know if you have a monitor there. We're showing it to our viewers. This is in Lima, Peru. These are the leaders of the APEC, the Asia Pacific Economic Cooperation Conference. Every year they get together and they wear some funny outfits, and this year it looks like they've got some ponchos over there. We need a wide shot to really appreciate what's going on.

We've seen some funny shirts over the years. Even as we speak right now, this is the president -- there he is -- the president's last trip abroad by almost all accounts. He's got his hands full in these final few weeks of his administration. But there's limited clout, there's limited ability what he can do.

HENRY: Absolutely. I was going to model the poncho myself, Wolf, but it's a little cold here in Chicago so I decided against it. I think you're absolutely right. The president, obviously, is a lame duck. It's difficult for him to have much impact on the financial crisis or all these national security crises.

We've got two wars going on, you've got threats from Iran, North Korea, you go all around the world. And that's why from here in Chicago, what we're hearing from people close to Barack Obama is right after Thanksgiving, when he gets the economic team out of the way, he's going to hit hard with the national security team. He's already pulled in, as we know, Hillary Clinton, likely nominated to be secretary of state. That's on track.

We're also hearing from sources close to the transition that someone you know well, retired Marine General Jim Jones, is a likely nominee, or pick rather for national security adviser inside the White House. There's even a lot of speculation starting to build that Defense Secretary Robert Gates may stay on for even just a brief interim period to have some stability. Interesting because there are some real high-powered players that Barack Obama is pulling into this national security team.

But as you know, not all of them are obviously -- or almost none of them are where the left of Barack Obama's party is in terms of pulling troops out of Iraq. You had Hillary Clinton, who voted for the war, Robert Gates who is obviously carrying out President Bush's policy. So some interesting push and pull on that. But also on keeping not just a so-called team of rivals but almost like a team of egos.

BLITZER: We'll continue that and pick up that thought on what is going on. What does all this stay about the president-elect of the United States? That's coming up. The best political team on television will stand by. Also, the House Speaker, Nancy Pelosi, she spoke about Congress's tough message to the big three automakers earlier today. We're going to tell you what she had to say in our very popular "In Case You Missed It" segment. Stay with us. More LATE EDITION after this.


BLITZER: We'll get back to the best political team on television in a moment. By first, "In Case You Missed It," let's check some of the highlights from some of the other Sunday morning talk shows here in the United States. On CBS, the House speaker, Nancy Pelosi, expressed disappointment with the case that the big three automaker executives made to Congress this week for a multibillion-dollar bailout.


PELOSI: We had hoped that at the hearings this week that the heads of the auto companies would come in and tell us what they would use the money for. We believe the American people need that accountability. We need to know what the money is for. And so, that, we can find out if they're going to be a viable concern. And that's what we've asked them to do.


BLITZER: On ABC, the top Republican on the Senate Banking Committee, Richard Shelby, and the Democratic chairman of the Joint Economic Committee, Chuck Schumer, discussed the scope of a second economic stimulus package.

SEN. CHARLES E. SCHUMER, D-N.Y.: I believe we need a pretty big package here. First, I think that Congress will work with the president-elect starting now and will have a major stimulus package on his desk by Inauguration Day. I think it has to be deep. In my view, it has to be between $5 and $700 billion, and that's because our economy's in serious, serious trouble.

SHELBY: One thing we better be careful about, not just throwing money, borrowing a lot of money and throwing it at deals and creates no jobs to speak of. What we need is to really get the economy going. I think it's fair to say that we Republicans will look at the details and see if we can support it. I want to support things that are meaningful for the economy.


BLITZER: Highlights from the other Sunday morning talk shows here on LATE EDITION, the last word in Sunday talk. The best political team on television is standing by. We'll talk about Hillary Clinton as secretary of state and more, right after this.


BLITZER: We're back with the best political team on television, Ed Henry, Gloria Borger and Joe Johns. Gloria, listen to the exchanges they had during the primary season when they were both seeking the Democratic presidential nomination, Obama and Clinton.


OBAMA: The notion that somehow not talking to countries is punishment to them, which has been the guiding diplomatic principle of this administration, is ridiculous.

CLINTON: I will promise a very vigorous diplomatic effort, because I think it is not that you promise the meeting at that high a level before you know what the intentions are. I don't want to be used for propaganda purposes. I don't want to make a situation even worse.


BLITZER: Then after that CNN/YouTube debate, she told an Iowa newspaper, she said Obama's policies in her words were irresponsible and frankly naive.

BORGER: Who? Who?

BLITZER: All right now they're going to be partners. They're going to be partners in this new administration. What do you think?

BORGER: Well, a couple things. First of all, Obama has brought a rival into his cabinet who disagrees with him on certain things. I think in the end he's the boss, and I think in the end, they'll come together and figure out what to do.

I think if Obama were really honest with you, he might say that he rather would have dialed that back in that initial debate where he said he would have diplomatic negotiations at the top and he said he wanted preconditions.

Look, I think Hillary Clinton is going to be a team player. She's been a team player in the Senate. And Barack Obama is number -- is the boss, and don't forget, in their discussions now, we know that she doesn't have to go through anyone to get to the president of the United States. And that's really, really important. So, they can form a relationship. BLITZER: It is clear, you know, this is a president-elect who has a lot of self confidence, Joe. He didn't have to invite Hillary Clinton to become secretary of state. He wanted someone like her to be there. And it says a lot about him.

JOHNS: Well, it's tremendous confidence, you're right. And it's funny. With the Clintons you always get drama, you always get uncertainty. That's sort of the hallmark of them.

On the other hand, anytime you bring strong people into an administration, there's always the possibility of a free agent. There is always the possibility that there's going to be someone who goes public even with leaks about their opposition to a presidential policy. That said, there are a lot of people in the administration who think she would be marginalized if she were to do that. She would be ineffective. She would lose her access to the president.

BORGER: She would be fired.

JOHNS: Exactly. So, on the other hand, if they want to put some leaks out there I'm on Facebook and -- so be it.

BLITZER: Good. You're going to get a lot of reaction. All right. Ed Henry, you're in Chicago right now. The fact that he's even considering Robert Gates, the current defense secretary, to stay on as his defense secretary, and you mentioned James Jones, the former NATO supreme allied commander, retired four-star U.S. marine becoming the national security advisor -- is this a team that potentially could irritate some on the left but at the same time reassure a lot of the world?

HENRY: Absolutely. I've been talking to a lot of foreign policy experts who have been advising the Obama transition who say that he really does seem to be tilting more towards a pragmatic approach to foreign policy and is not going to be where the left wants him on every single issue. That could bode well for governing but he could face a lot of political pressure.

Now, Obama aides though are insisting here in Chicago that he is sticking to his core principles of pulling out U.S. combat troops from Iraq within 16 months. But obviously, when you start bringing in these realists, pragmatists, potentially someone like Robert Gates, it's unclear whether he can keep that promise. It is going to be something to keep a very close eye on.

And also, in terms of keeping these folks together. I wonder now Joe Biden is going to see Hillary Clinton and ALL these power players. He thought he was going to be the big guy on foreign policy.

BLITZER: Hold those thoughts, guys, because we have to leave it right there. Ed Henry, Gloria Borger, Joe Johns, good discussion. The former vice president Al Gore had some choice words for the current Vice President Dick Cheney. You're going to want to hear what he had to say, when LATE EDITION continues. (COMMERCIAL BREAK)


AL GORE, FORMER VICE PRESIDENT: I think it's good to have an active, powerful vice president who can help the president carry a lot of the burden.

FAREED ZAKARIA, CNN ANCHOR: You just don't think that person should be Dick Cheney.

GORE: Well, not only that, I think that the nature of the delegations in this present administration were unhealthy for the country.

(END VIDEO CLIP) BLITZER: Al Gore speaking to Fareed Zakaria. That interview coming up, by the way, at the top of the hour. No love lost between Al Gore and Dick Cheney.

BORGER: No. I think what he meant by the nature of the delegations is that essentially Dick Cheney became president and shouldn't have in lots of circumstances. Too much power. Too much power.

BLITZER: Al Gore, he is busy campaigning this weekend for the Democratic challenger in Georgia, Saxby Chambliss. He's staying in, Jim Martin, that's the Democratic challenger. He's still staying in politics right now even though he's a Nobel Peace Prize winner.

JOHNS: Well sure, a lot of people still like Al Gore. A lot of people think he ought to run and he's from the south, so he might have a shot at doing something there.

BLITZER: The whole notion of al gore playing some sort of role in this new administration, Ed Henry, you picking up anything? Is he just going to be sort of outside adviser or something a little bit more formal?

HENRY: It really sounds more like the outside adviser. His name has been floated for a so-called climate czar, but I'm not certain that the Obama folks in the end are going to end up picking these so- called czars and frankly, a lot of people in the Gore inner circle say he's so influential on the outside right now, specifically on the issue of climate change, it might not really make sense to have an official role. Instead, he could come in, advise the president here and there but do his own thing on the outside, Wolf.

BLITZER: Ed Henry, once again, thank you. Gloria Borger, Joe Johns. Good discussion.

By the way, you can see the entire interview on with Al Gore on "FAREED ZAKARIA: GPS." That starts in a few seconds. That is your LATE EDITION for this Sunday, November 23rd. Please be sure to join us again next Sunday and every Sunday at 11:00 a.m. for the last word in Sunday talk. I'm in "THE SITUATION ROOM" Monday through Friday 4:00 p.m. to 7:00 p.m. Eastern. Have a great Thanksgiving. Thanks very much for watching. "FAREED ZAKARIA: GPS" starts right now.