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CNN Larry King Live

Can the President-Elect Fix the Economy?

Aired November 24, 2008 - 21:00   ET

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

LARRY KING, HOST: Tonight, Barack Obama's economic dream team revealed.
Can key players prevent worldwide financial collapse?

They're going to try, beginning right now.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D), PRESIDENT-ELECT: Because the truth is, we do not have a minute to waste.

(END VIDEO CLIP)

KING: Budgets to be slashed. Sacrifices -- start making them.

(BEGIN VIDEO CLIP)

OBAMA: This will not be easy. There are no shortcuts or quick fixes to this crisis.

(END VIDEO CLIP)

KING: And be prepared to pay...

(BEGIN VIDEO CLIP)

OBAMA: It's going to be costly.

(END VIDEO CLIP)

KING: ...$700 billion or more.

Will the U.S. and you go broke in the process?

It's a moment of truth for America's next president and everybody on the planet, next on LARRY KING LIVE.

A big day today as we head toward December.

Let's meet an outstanding panel to get into it.

Here in Los Angeles, Ben Stein, the economist, "The New York Times" columnist, former presidential speechwriter, the best-selling author of latest book "How To Ruin the United States of America.".

In Berkeley, California, Robert Reich. He was secretary of Labor in the Clinton administration, economic adviser to Barack Obama and author of "Super Capitalism

The Transformation of Business, Democracy and Everyday Life." That's now out in paperback.

In Mountain View, California Carly Fiorina, the former CEO of Hewlett-Packard. Carly served as senior economic adviser to John McCain.

And in New York, Katrina Vanden Heuvel. She is the editor and publisher of "The Nation".

We'll start with Ben. The big story -- everybody is talking about him -- is Timothy Geithner. He's going to be the Treasury secretary. Everybody is raving about him.

What about you?

BEN STEIN, COLUMNIST, "THE NEW YORK TIMES," ECONOMIST: Well, I'm not raving about him. He's obviously a very capable and intelligent man, he gets along well with people. But he was part of the Paulson team that failed to rescue Lehman Brothers, which I think will go down as one of the major gaffes in economic history. He was the president of the New York Fed for roughly five years. He had some measure of supervisory -- some measure of supervisory authority over them. He didn't seem to have done much about it.

He was part of the Troubled Asset Relief Program with Paulson. That doesn't seem to have been handled very well.

It's just not -- he was deregulator. That doesn't seem to have worked out very well.

I'm not sure which...

KING: So why is he...

STEIN: ...part of the...

KING: ...getting raves?

STEIN: Well, I don't -- well, everyone on the Obama team is getting raves. I'm not quite sure why. He's a fast learner. He may have learned the error of his ways and he may go on to be a great Treasury secretary.

KING: Carly, what do you make of it?

CARLY FIORINA, FORMER ECONOMIC ADVISER, MCCAIN CAMPAIGN: Well, I think, first of all, let's admit that virtually everyone has failed to predict what's going on here. There were a whole lot of people who believed that stepping back from Lehman Brothers was the right thing to do. And I think it's also worth remembering that people like Larry Summers, Bob Reuben, were very much in favor of deregulation. And Bob Reuben, at Citigroup, actually was part of the board and management team that took on massive risks. My point is that lots of people have been wrong about lots of things. And I think it's one of the reasons why we have something of a crisis of confidence right now. And because when experts can't predict, it's difficult to have faith in their ability to prescribe.

KING: All right. Well said.

Robert Reich, your thoughts?

ROBERT REICH, ECONOMIC ADVISER, PRESIDENT-ELECT OBAMA, FORMER LABOR SECRETARY, PRESIDENT CLINTON: Well, Carly Fiorina is exactly right. Nobody predicted what was going to happen. And I think historians will look at Hank Paulson's tenure as the Treasury secretary with not very good reviews of his performance, partly because nobody knew or understood what he was doing and he changed directions so often.

I think it unfair to blame Tim Geithner for this. Tim Geithner was a minor player. And I think it also unfair to link Bob Reuben to Tim Geithner too closely.

Tim Geithner has a terrific reputation. He's going to be a great Treasury secretary. Larry Summers is a good friend. He is extremely bright. He will be a great economic adviser.

Peter Orszag, who is going to be at OMB, is one of the great bright lights on the Hill right now at Congressional Budget Office.

This is a wonderful team, a competent team. And that they -- and they will be led, indisputably, by our president-elect, Barack Obama, who says over and over again he is going to get this economy going again not only with a big stimulus package -- which we will get to, I assume -- but also by making sure that this big bailout of Wall Street actually gets to Main Street.

KING: Quickly, Robert, did you expect to be part of this team?

REICH: No.

KING: OK. Well answered.

(LAUGHTER)

KING: All right, Katrina, what do you make of it?

KATRINA VANDEN HEUVEL, EDITOR, PUBLISHER, "THE NATION": Well, I wish Robert Reich was part of this team. I am in between Carly and Robert, because I see some Clinton retreads -- people who presided over the deregulation that has taken us into this mess. You can also look at it as a centrist technically competent team and Barack Obama as a pragmatist who will enact, it looks today, like very progressive policies.

The stimulus that he is talking about -- the public investment in our country is what is needed for relief, reform and reconstruction. And if he needs the centrist, competent team to be that pragmatist in -- progressive in pragmatist's clothing, so be it.

But we have a long way to go to actually deal with the people's economy of this country, which is in radical crisis.

KING: All right. In introducing the economic team today, President-Elect Obama had this to say about the challenges the country faces.

Watch.

(BEGIN VIDEO CLIP)

OBAMA: This will not be easy. There are no shortcuts or quick fixes to this crisis, which has been many years in the making. And the economy is likely to get worse before it gets better. Full recovery will not happen immediately. And to make the investments we need, we'll have to scour our federal budget line by line and make meaningful cults and sacrifices, as well.

(END VIDEO CLIP)

KING: What do you make of this beginning, Ben?

STEIN: I'm waiting for the president who says it's going to be easy and we've got a quick fix.

But I'm -- I think going through the budget line by line is kind of silly. I mean the last person who did that was Jimmy Carter, with -- well, we now know the results of that. He can't go through it. There are millions of lines -- or at least hundreds of thousands -- in the budget. And public works has never worked as a way of getting the U.S. out of a deep recession.

KING: It did for Roosevelt.

STEIN: No, it did not, sir. We had 20 percent unemployment in 1941, just before World War II started. It didn't work. It worked somewhat. It was better than nothing. But it has never worked for getting a country out of a deep recession.

So I'm not quite sure that that works. Extremely stimulative fiscal and monetary policy will do it, but not public works.

KING: Carly, at least perceptively, he's doing very well, isn't he?

FIORINA: Well, yes. And I think he did absolutely the right thing to lower people's expectations and to give folks a dose of reality here. He is absol -- President-Elect Obama is absolutely correct, this is not going to be easy. It is going to take a while. Most economists are predicting that the unemployment rate will probably hit 8 or 9 percent by the end of 2009. So it's going to be a while.

I do agree with Ben, however, that if we're looking at massive public works programs alone to try and correct this situation, I don't think that will be enough. Clearly, we need fiscal and monetary policy, as well, which I'm hopeful we will also see.

But I guess the missing element to me right now continues to be what is going to happen with small business, which is the biggest producer of jobs in this country. Two thirds of the jobs come from small businesses.

Small businesses are hurting right now. And I think the thing that we haven't yet seen with all these bailouts is a positive impact on the real economy. Credit is still virtually nonexistent for small businesses and for consumers. And until and unless that gets better, we're going to have a tough problem, no matter how many public work projects there are.

KING: We'll have more with our all star lineup after the break.

Stay with us.

(COMMERCIAL)

(BEGIN VIDEO CLIP)

OBAMA: We have a consensus -- which is pretty rare -- between conservative economists and liberal economists that we need a big stimulus package that will jolt the economy back into shape and that is focused on the 2.5 million jobs that I intend to create during the first part of my administration.

(END VIDEO CLIP)

KING: Now, Robert Reich, this president-elect and the sitting president, Mr. Bush, apparently are getting along, with the transition teams working together, better than anybody ever.

But, frankly, can a president-elect do anything?

REICH: Well, a president-elect can do two things, Larry. And this is exactly what our present president-elect has done. Number one, name a team -- a sterling team. And, by the way, a moment ago when I went through some of the members of that team, I left out Kathleen Romer, who is a professor here at the great University of California at Berkeley, who will be head of the Council of Economic Advisers.

And the second thing a president can do is to tell the country where he wants to go, in general terms. Now, he can't actually introduce a piece of legislation yet.

But that large stimulus package that he was talking about, which, in my view -- and that's just my view -- ought to be about $600 billion or $700 billion, that stimulus package is going to do a lot to get the economy moving.

And unlike Ben Stein -- and I will take issue with Ben on this -- there is no purchaser of last resort in this economy left other than government, because consumers have basically gone on strike. They don't have money left. They can't borrow. Investment is not available. And exports are not going to be carrying the economy because export markets are in recession.

So government is the purchaser of last resort. That big stimulus is going to be terribly important to get people back to work.

VANDEN HEUVEL: Robert...

(CROSSTALK)

VANDEN HEUVEL: Robert is...

KING: (INAUDIBLE) you can respond before Katrina.

STEIN: I...

VANDEN HEUVEL: Robert...

(CROSSTALK)

VANDEN HEUVEL: Robert...

STEIN: Her name is -- her name is...

KING: Hold it. Hold it.

STEIN: Her name is Christina Romer. And, also, I never said that. I've been the one saying exactly the opposite, Robert. I've been saying government has to be the stimulative one. There is nobody else. You're confusing me with some other Stein.

KING: Katrina, are you surprised...

REICH: Oh, I thought -- I'm sorry then.

(CROSSTALK)

REICH: Ben, I thought I heard you saying that -- I thought I heard you saying...

STEIN: No.

REICH: ...just a moment ago that we shouldn't -- the government should not get involved in infrastructure and public works.

STEIN: No, no. I said it to -- as a definitive measure -- to end recessions or depressions.

VANDEN HEUVEL: But, Larry, if I...

KING: Katrina, are you...

(CROSSTALK)

VANDEN HEUVEL: Larry...

REICH: We ought to have a discussion...

VANDEN HEUVEL: But, Larry, could I say...

REICH: We ought to have a little bit of a discussion of what Ben is...

KING: All right.

REICH: If Ben thinks that government ought to be spending -- and I agree -- what government ought to be spending on.

VANDEN HEUVEL: Larry, could I...

KING: Katrina has...

(CROSSTALK)

KING: Katrina is due to get in.

Katrina?

VANDEN HEUVEL: Larry, could I say that I do think Robert Reich is right about -- President-Elect Barack Obama has an opportunity, as he has used, to signal that he is going to come on day one with a Congress that is -- should reconvene and craft legislation -- major, massive stimulus program that he can sign on day one as a signal to this country that he will put people back to work, to rebuild this country.

In the long-term, we need public investment in building a 21st century infrastructure -- education, health care -- the human capital of this great country that has been so deteriorated -- it has deteriorated and been neglected.

And then we need to keep people in their homes. Larry, 84,000 foreclosures last week. Go to the root cause. Keep people in their home so the economies and the neighborhoods don't deteriorate.

There is much this president can do. And I think he is signaling it.

Finally, Ben Stein will probably have a fit at this, but this country needs an industrial policy. We need a plan for the long-term. We can no longer lurch -- the free market conservative paradigm has been discredited.

KING: OK...

VANDEN HEUVEL: It is in the dust bin of history. Let us find a way to rebuild this country...

KING: Ben, are you...

VANDEN HEUVEL: ...with some common sense.

STEIN: Wait a minute. Wait, wait, wait.

KING: (INAUDIBLE)? STEIN: Are you going to tell me, Katrina, that the common sense is going to come from some government bureaucrats?

I mean that's a bit far-fetched. An industrial policy...

REICH: No, it's...

VANDEN HEUVEL: Is a private-public partnership.

(CROSSTALK)

REICH: It's not coming from Wall Street, I'll tell you that.

STEIN: ...makes a lot of sense. And an industrial policy has been tried. It's never worked anywhere. So it won't work.

But I agree the economy is in...

VANDEN HEUVEL: That is not true.

STEIN: ...in bad -- this country is in great need of infrastructure repair. It's just not going to be sufficient by itself.

By the way, I might say, I think Christina Romer is the joker, so to speak, in this deck, because she is a great expert on business cycles. And she is very, very important to this team. I don't think she can be even for a moment underestimated. She's very, very important.

KING: Our panel will be back.

We'll be back in 60 seconds with a different look at the auto industry's troubles.

Don't go anywhere.

(COMMERCIAL BREAK)

KING: Remember my old column in "USA Today?"

For 20 years I wrote it. It's back. Check out "Kings Things." It's my two cents. Read it now on our blog at CNN.com/larryking. It's there right now. I saw it.

"Saturday Night Live" is always hysterically topical.

Let's take a look at the fun they had this weekend satirizing the heads of the big three automakers and their trip to Capitol Hill on private jets.

Watch.

(BEGIN VIDEO CLIP FROM "SATURDAY NIGHT LIVE," COURTESY SNL/BROADWAY VIDEO)

UNIDENTIFIED MALE: As many of you know, instead of flying, the three of us decided to drive here from Detroit.

(LAUGHTER)

UNIDENTIFIED MALE: But we had car trouble.

(LAUGHTER)

UNIDENTIFIED MALE: I was going to drive my 2009 Cadillac XLRV, a model we at G.M. are very proud of, but every time I tried to start it, I just got a powerful electric shock and the upholstery would catch on fire.

(LAUGHTER)

UNIDENTIFIED MALE: Bob here wanted to come in his new Chrysler 300, but the brakes, steering, transmission and engine all went out.

(LAUGHTER)

UNIDENTIFIED MALE: Also, I believe the windshield came off?

(LAUGHTER)

UNIDENTIFIED MALE: The chair is happy to recognize our friend from New York, Mr. King.

UNIDENTIFIED MALE: Thank you, Mr. Chairman.

(LAUGHTER)

UNIDENTIFIED MALE: Gentlemen, I would really like to help you. I think we all would. But your testimony here today does not inspire confidence and I don't see how we could justify this bailout by taxpayers.

UNIDENTIFIED MALE: Congressman, with all due respect, we are not talking a gift or a subsidy, we are talking about a loan.

UNIDENTIFIED MALE: A loan on which you will mostly certainly default.

UNIDENTIFIED MALE: Yes.

(LAUGHTER)

(END VIDEO CLIP)

KING: That's funny.

We'll be back with our panel.

Don't go away.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP) OBAMA: We can't just write a blank check to the auto industry. Taxpayers can't be expected to pony up more money for an auto industry that has been resistant to change.

(END VIDEO CLIP)

KING: OK, Carly Fio -- Carly Fiorina, what do we do?

What do we do about the cars?

FIORINA: Well, I think, first of all, it is reasonable to expect a high level of accountability from the CEOs, and, frankly, from their boards, as well. One of the reasons the big three auto companies are down in Washington asking for a bailout is because they failed to take some important measures.

They failed to make investments in the kinds of cars that Americans want to buy. In other words, they have failed to make those decisions necessary to maintain and improve their own competitiveness.

And so $25 billion -- while the hearings were fascinating to watch -- the reality is that $25 billion, no matter where it comes from, is not enough to get these companies in competitive shape.

KING: But -- OK.

Robert, do we then...

FIORINA: And so...

KING: OK, I'm sorry, but I've got to -- I'm trying to move everybody in. So...

FIORINA: No, go ahead.

KING: Robert, do we, therefore, bail them out or let them go the way of the ways?

REICH: Well, Larry, I think there's an emerging consensus in Washington that although taxpayer dollar may have to be put into the pot, there have to be sacrifices by executives, creditors, shareholders and also by the UAW. Everybody has to put something into the kitty in order that there be enough money there to restructure the industry, not just tide them over the recession, but actually restructure them to make more fuel-efficient cars and cars that are more competitive in the future.

Let me also add that yesterday, in the dead of night, as it were, the government provided $25 billion to Citigroup. There was not very much legislative discussion. There was not very much public knowledge. To this day, nobody knows exactly the liabilities that the public has taken on.

Well, when you have an automobile industry with some three million people who are dependent for their paychecks on it, that may be more significant, even, than Citigroup. KING: Katrina, we -- is it that we have to help?

VANDEN HEUVEL: Larry, I think that there's something fundamentally wrong with a government that gives bankers a bailout and autoworkers a cold shoulder. I think we do need to restructure the auto industry. It needs to become greener, more innovative, more fuel- efficient. And there needs to be -- there need to be public members on the company boards. There need to be demands and accountability that we have not seen with the bailout of the banking industry.

So I don't think we can let the auto industry collapse. Bob Reich is right, it would devastate retirees, communities and workers.

And as Barack Obama has said, the auto industry is the backbone of American manufacturing. Let us -- let us make it more innovative and more fuel-efficient and greener.

KING: Ben?

VANDEN HEUVEL: Don't let it go down.

STEIN: Oh, absolutely. You know, it stuns me that we would be shelling out money to these Wall Street firms, whose executives are wildly overpaid. It stuns me that we would be yelling at the auto executives about flying in a private plane.

Who cares if they fly in a private plane?

We're talking about the livelihood of millions of decent, hardworking Americans.

Who cares if a few fools fly on a private plane?

We have got to keep G.M., Ford and Chrysler in business, not for their executives, not even for their stockholders, for the honest, decent families that work there and who are, as President-Elect Obama said, the backbone of America.

To even consider letting them go under is just insane.

KING: But, Carly, we have to put some impositions on them, right?

FIORINA: Yes. And let me just agree with everyone who just spoke. I think we need to be focusing a lot of attention not simply on giving these CEOs $25 billion -- and they were unable to articulate the plan as to what they would use that money for. We ought to be focusing our energies on, OK, how do we help these workers during a very difficult time.

Let's immediately extend unemployment benefits. Let's stop taxing those benefits. Let's get those workers training so they are available and ready to take on some of those new jobs that President-Elect Obama is talking about creating.

In other words, let's focus our energies on the people who really do need the help. But I absolutely agree that the automobile industry needs to be restructured. And it's worth remembering that the big three Japanese competitors are now employing almost -- more people here in the United States, are creating manufacturing jobs here in the United States.

And I think it's worth remembering, as well, that the government of Michigan has some responsibility, also, here. There is a reason why jobs are flowing out of the State of Michigan -- it has to do with their tax policy, among other things -- and flowing into states like Alabama and others. So we have to think about the tax structure that these companies are dealing with, as well.

KING: Robert, is she right?

FIORINA: Oh, could I just -- I think there's a race to...

KING: I'm sorry.

Go ahead, Carly.

VANDEN HEUVEL: There's a race to the bottom that Carly Fiorina was describing in that strategy. I think instead of companies going to states where they can have workers without unions -- which will be a fight in this Obama administration, to pass something called the Employee Free Choice Act -- so that workers have not simply jobs, but good jobs with a middle class security that built this country and made it a great country.

So to talk about Michigan as if it's at fault because it has certain kinds of tax policies is to ignore the reality. And it's also to ignore the fact that states right now, Carly, are in a beleaguered state that this stimulus and this public investment, which we need, needs to be addressed to states and municipalities and towns so that this country is strong again.

FIORINA: Yes, I don't disagree with some of that. But I certainly would absolutely disagree with your analysis of the Free Choice Act. If it is true that unions will provide so much better benefits and pay to workers, then allow workers to have a secret ballot. It is unbelievable to me that we're actually considering passing legislation which removes from employees the ability to have a secret ballot, which is fundamental to the democratic process in this country.

REICH: Larry...

VANDEN HEUVEL: The secret ballot has allowed management...

REICH: If I...

VANDEN HEUVEL: ...to intimidate and harass.

KING: All right. Hold it. I'll tell you what I'm going to do. I'm going to take a break and we'll have Robert Reich's thoughts on this. He was secretary of Labor.

Is there a role for John McCain in all of this? (COMMERCIAL BREAK)

KING: OK, Robert Reich we have diverted a little, but what do you make about Michigan and unions and open votes?

REICH: Well, Larry, I don't want to get into the intricacies right now of the Employee Free Choice Act, but just to say that there's a larger fundamental issue here.

This last seven years have been the first so-called recovery in which median family incomes -- the typical family -- have declined. And, you know, the housing bubble masked a lot of the problems for the typical family, because the typical family was using the rise in housing values to have home equity loans and refinancings.

But the minute the housing bubble burst, that piggy bank was closed off to the average family, which means that there's just no more money and no more purchasing power. People cannot go deeper into debt right now. And so much of the economic agenda of President-Elect Obama, coming to be President Obama, has got to be to lift the wages of average working people -- not only get them jobs, but lift their wages.

Unionization is part of that strategy, because unions provide people more bargaining leverage with employers and investors to get better wages.

Also, a middle class tax cut is part of that; also, a major stimulus program to provide jobs; also, making sure that any bailout doesn't go just to Wall Street -- or even primarily Wall Street --

KING: Given that...

REICH: ...but goes to homeowners who are in trouble. In other words, this is a bottom-up, rather than a top-down economic recovery.

KING: What's wrong with that analysis?

STEIN: Well, unions raise wages for the people in the unions, but they don't raise wages for the people in society altogether. There is only a finite amount of money. If the unions take a big chunk of it, it means the non-union people have less left for themselves. Also, the idea that somehow you are going to be able to cut taxes on the middle-class is a bit questionable, because the great majority of people in the middle-class don't pay much tax, if any, at this point in any event. The idea of somehow lifting the middle-class by anything the government does is very questionable.

KING: Carly, you were a senior economic adviser, Carly, to John McCain. Do you see him having any role at all in this bipartisan approach of the president-elect?

FIORINA: Well, Senator McCain will always play a role because he is a pragmatist. He is someone who knows how to reach his hand across the aisle and has done so many times. I have no idea whether there is a role in the administration or that he would even consider it. But I think as a senator he will be an important ally for President-Elect Obama. And he will play that role when he can. If he feels he must oppose the president, I know that he will. But I think that he will be able to put together bipartisan coalitions.

I do just have to say, however, in all of our conversation about the wonderful things that unions do, and they do some good things, it's worth remembering that it is union contracts that are in part to blame for the automotive industry's lack of competitiveness. So simply saying that unions will solve all our problems is contrary to the facts. Union contracts in Detroit are -- part of what must be restructured if the big three are going to be competitive in the world economy.

VANDEN HEUVEL: If we had -- if we had universal health care, Larry, we -- universal health care would have helped these auto companies be more competitive.

KING: Katrina, we are out of time. We are going to have all of you back, Ben Stein, Robert Reich, Carly Fiorina, and Katrina Vanden Heuvel. Bob Woodward is next when LARRY KING LIVE returns.

(COMMERCIAL BREAK)

KING: Always a great pleasure to welcome Bob Woodward to LARRY KING LIVE. An old friend, the number one "New York Times" best- selling author. His most recent best-seller is "The War Within," Bob Woodward of the "Washington Post." Among your best-sellers was "Maestro, Greenspan's Fed and the American Boom." You know about financial things. What do you make of the Obama economic team?

BOB WOODWARD, "THE WASHINGTON POST": Well I think it is going to try. And I think there is -- from Obama on down, they're engaged in all of this. The problem is there is some history of other administrations over the last 30 years where they have been in economic trouble, and they tried something, like Nixon tried wage and price controls back in 1971, believe it or not, deemed by everyone to be a giant failure. Bush senior, when he was president, came out and promised when he was running for election "read my lips, no new taxes," very famously said and emphasized. And then he had to raise taxes.

I think the history, as you go through administration after administration, is they often don't get it right and they certainly often don't get it right the first time. So there is going to have to be some tolerance on the part of Obama, his team and the public that the crisis we are in now it really is one in a century. If you just look at it, investment banking firms like Bear Stearns and Lehman Brothers going down, the biggest insurance enterprise in the world, AIG International, taken over, Fannie Mae, Freddie Mac, now Citigroup, one of the biggest banks is being bailed out.

So in a sense the government is taking over or assisting all of these normally -- previously free enterprises. Giant change. And the other element here is: what are the facts? What really went on in Wall Street to cause this problem, all of these problems? I think it is going to take years to dig it out. KING: Is this a Woodward book?

WOODWARD: It might be. It certainly is one of the --

KING: I sense the Woodward book coming.

WOODWARD: -- defining events of our time. And it is going to go on. I think the most important thing that President-Elect Obama said today is the economy is likely to get worse before it gets better. So here was the new man talking realism.

KING: Let's touch some other bases. It seems certain that Hillary Clinton is going to be secretary of state. What do you make of that choice?

WOODWARD: Bold move. You know, controlling the Clintons, either of them is very, very difficult. I'm sure she will do it in a loyal way, but she always has -- my old Watergate partner, Carl Bernstein, wrote that definitive biography. It's called "A Woman in Charge." That is her history. She takes charge. She has very strong ideas. She does her home work. How do you control Hillary Clinton at the State Department? Tell me?

KING: What about her husband? What is his role in all of this do you think? Will be?

WOODWARD: Easier to describe the creation of the universe, probably. You know, he is out there. He is doing things. He has a big heart. He's trying to help lots of people. And underneath all of this fund-raising that people have rightly been asking questions about is a lot of good, charitable work. So he'll be there. It will be good for our business, journalism. Whenever the Clintons are on stage in positions of -- of power and authority, the story never ends.

KING: Why is Obama making this selection?

WOODWARD: I think, to a certain extent, people have convinced him that the economic crisis is so severe he is going to have to focus on it, not exclusively, but it is going to have to be job one, two, and three. So if you get somebody like Hillary Clinton in there, you give Hillary and Bill the world, to a certain extent, and let them go out and do what they do under very strong supervision.

KING: Kind of gutsy. Retired General Jim Jones, who I know you are close to, is touted as the leading candidate to be the national security adviser. What do you make of that selection? What is he like?

WOODWARD: Well he is -- my wife Elsa has known him for ten, 15 years and said this is the man who should be president of the United States, to be quite honest. He has a phenomenal military record. He has done lots of diplomacy. He was NATO commander. He was a platoon commander in Vietnam. So what -- he knows what combat is really like. He was one of the great skeptics about Saddam having WMD in Iraq before the war. So if they pick somebody like that, who has incredible presence and stature and experience, it's going to be a plus for everyone, I suspect.

KING: Do you think he will be picked?

WOODWARD: I don't know. I mean that's -- there are stories that he is at the top of the list. But those things change. But if you look around, there are other people who are qualified. This -- I met Jones before he was a general. He was a colonel. And immediately he stuck out. And in conversations over the years, he has always been very thoughtful. He was willing to go public and criticize Rumsfeld while he was a four-star general, and say that Rumsfeld had emasculated the Joint Chiefs of Staff.

KING: Take a break. Bob Woodward remains. David Gergen will join us. Vernon Jordan tomorrow night. Back in 60 seconds with your blog. Stick around. Especially, you, Bo, in Nebraska.

(COMMERCIAL BREAK)

KING: You have been busy, audience, blogging. We have been busy sorting through what you have to say. Let's check it out with David Theall. David?

DAVID THEALL, LARRY KING LIVE PRODUCER: Larry, the most popular stories on your blog for the last couple of days have been those dealing with the economy. Receiving so much attention in so many comments that we have we received today was the mention of the proposed economic advisers for the new Obama administration. Now, the overwhelming majority of people are 100 percent behind the new president-elect and the decisions he is making. It is worth mentioning we are still hearing from those people who think that the faces and the names look a lot like those that did in the Clinton administration.

Still, overwhelming majority of people that we have heard from on the blog today are like Bo in Nebraska who says he thinks "Obama is on the right track. We need intelligent, thoughtful people trying to figure a way out of what he calls this mess."

Now, Larry, if you want to get comments on the blog, mention these simple words: proposed auto industry bailout, or loan, depending on which side of the fence you come down on. That -- without a doubt, the most popular stories on your blog are those stories that have to deal with the auto industry bailout. The overwhelming majority of those people that we are hearing from are saying no deal, no bailout, no loan. We are of course hearing from those who say that the price is too great to pay for the auto industry worker, the suppliers, et cetera.

Still, the overwhelming majority come in like Mike, who says "why don't the politicians give preservation of Social Security and Medicare system as much attention as bailing out the big three." We will, of course, continue this conversation throughout the evening on CNN.com/LarrYking. When you go there, look for the live blog link, click it, come on in. Join the conversation.

KING: Thank you, David. David Theall, right on top of the scene. Bob Woodward returns. We're adding David Gergen to the mix. Don't go away.

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KING: Bob Woodward remains. Joining us now is David Gergen, CNN senior political analyst. David, "New York Times" columnist Tom Friedman said we should seriously consider moving up the inauguration with the economy in such critical condition. Fair point?

DAVID GERGEN, CNN POLITICAL ANALYST: It's an interesting point. Obviously we are not. But I think what has been interesting, Larry, is how Barack Obama over the last few days has moved into the vacuum that existed last week. Remember, we did have panic that was setting in, two straight days the market was in a nose-dive and going through levels that nobody expected it to go through. And then we had the -- the rumor that was supported today by the announcement of Tim Geithner going to the Fed. The market went up that day on Friday. As the Soledad reported, it went up again sharply today. That's partly because of this Citigroup bailout.

I think also over the weekend the fact that -- that President- Elect Obama announced this massive stimulus package and we are now seeing numbers circulating of somewhere between 500 to 700 billion dollars. I think both Bob Woodward and I would say we have never seen anything like that in our life times. That -- it's almost like the Powell doctrine in foreign affairs being brought to bear on economic policy on the war against a failing economy.

KING: You agree, Bob?

WOODWARD: Yes, it is. The Powell doctrine being: send overwhelming force, use everything you've got to make sure that you succeed. Back in 1993, when I think -- David, you were in the Clinton White House at that point. They were doing their economic -- their initial plan, and Larry Summers was working in the Treasury Department. And he wrote a long 108-page memo to President Clinton. Only Summers would do something like that.

GERGEN: Only President Clinton would read it.

WOODWARD: What was Summers urging? That they have a stimulus package that was thought to be a big deal at the time of 20 billion dollars. Now, we're talking about things that are 30 to 40 times that. I think that 30 to 40 suggests the magnitude of the problem now is that much greater than it was in the early '90s.

KING: Do you agree, David, with the president-elect, that it's going to get worse?

GERGEN: Absolutely. All economists think it will get to eight percent unemployment. We're six and a half now, and some think it will get up to 10, something we haven't seen in a quarter of a century. Already in places like Michigan, more than one out of eight people are on food stamps. We're in pretty serious straits.

But go back to the other question, Larry, about how Obama is helping to fill this vacuum. I found it very interesting -- Bob would remember this -- I haven't known -- I can't remember a president who actually is looking toward proposing legislation the Congress will enact in early January, might even act before his inauguration, he would sign after his inauguration. That's leadership from behind instead of out front. It's very, very striking. It may well work. Bob, do you recall anything like this?

WOODWARD: I can't. But this is the nature of the times and, quite frankly, the desperation. You rightly identify it as a vacuum. I also think that there is a vacuum of information. If you look in detail at what went on in some of these investment banking firms, not just the ones that went under, like Bear Stearns and Lehman Brothers, but all of them, it was a kind of jungle capitalism, where people were literally bleeding hundreds of billions of dollars out of the system, making deals, not really producing product.

People are going to start looking at that, not just in Congress, the FBI is looking at it. In our business of journalism, there will be an in-depth examination of how did this happen, not necessarily to identify witches, but to say how do we keep it from happening again?

KING: We're going to get a break and come back. This is a discussion I'd like to moderate all night long. We'll be right back with one segment left. Don't go away.

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KING: Bob, you have written about presidents. David, you have worked for four presidents. What strikes you about this man, Obama? Bob, you first.

WOODWARD: You have to compare him to George W. Bush. The trademark from Obama is control and engagement. It's very clear he is spending a lot of time on these issues. He's looking at it very carefully. He's trying to assemble a team, whether it's cohesive or a team of rivals, we will see. But he's putting together a team of people who are quite bright and quite experienced. When he talks, I think you feel, yes, he knows what he's talking about and he just doesn't have a talking point.

KING: David?

GERGEN: Larry, you know, we've known a lot of presidents who had great strengths and enormous weaknesses. This is one of the most balanced people I can remember coming into the office. Emotionally, he seems very well-balanced. Sometimes, we have presidents who are extremely bright but they're needy emotionally. This man seems well contained. He seems well anchored. I'm very impressed -- in the campaign, he ran one of the most strategic campaigns I've ever witnessed, one that was well executed, but they kept executing on strategy, kept carrying out a plan. He had a vision and a plan and then they carried it out superbly well. It was very well run campaign.

One has a sense, as he assembles this team, it's a real team of All-Stars, heavyweights. And he's formulating, as he did in that press conference today, he's been formulating a strategy for the long term. He's looking not only at the short term, what do we do to get the economy back on track, but he wants to use the answers for the short term to lay the groundwork for a long term view of what the American society and economy will look like.

I'm really impressed. I think Bob Woodward is absolutely right. We don't know whether their plans will work. We don't know how well the team will come together. But I must say the early indications are impressive.

KING: Can you say, Bob Woodward -- I don't want to put words in your mouth -- that you have high hopes for this man?

WOODWARD: The idea is to just chart what happens and point it out to him. David talks about the presidential campaign. He's absolutely right about that. He had some help from the other side. The winner always looks just great. I think running that presidential campaign against Hillary Clinton first and John McCain is hard, maybe a four on scale of 10. I think this economic problem and the difficulty, you don't know what will come at you next. If you look at the chronology of this, there is a surprise a day almost in it.

In the presidential campaign, you pretty much knew who Hillary was, who John McCain was. You really could anticipate. In this case, there are hidden X factors in the financial system. And it's not just in this country, it's global. So I think now he is confronting something, and I think he has a sense of this, that is a nine or a 10, and much, much more complex and difficult.

KING: David, do you think Gates will stay at Defense?

GERGEN: I hope so. If he does not stay, I hope it's Chuck Hagel, the Republican senator. I do believe there are issues still to be resolved in the last day or two about will he be able to keep his own team, especially at the deputy level, or will the Obama administration insist on putting their own man there in or woman into the number two position, for example? I think they have some of those issues to iron out.

But he sure would be strong. I think if you take -- I'm more optimistic about Hillary Clinton at State than Bob is, I think. But I think if you had Hillary and Clinton and Bob Gates and had this really strong person in Jim Jones at the National Security Council staff, that's a formidable team. I don't know -- I'd be curious about Bob's view on Admiral Blair who is said to be going to the intelligence community.

KING: We're out of time. Bob, can you give a quick five second answer?

WOODWARD: I don't know about that, but it does look formidable. I think Bob Gates probably will stay. He told me some months ago he wants to write a book. I'm sure a final chapter on my time in the Obama administration would be a selling point.

KING: Thank you both very much. Terrific stuff. You may remember, I had a column in "USA Today." I'm back. This time it's on my blog. It's my two cents. Read it now at CNN.com/LarryKing. And click on blog. Vernon Jordan tomorrow night. Time now for Soledad O'Brien and "AC 360." Soledad?